Medicare to Become Insolvent In 8 Years, Social Security in 16

Leslie Hanson
June 7, 2018

If that doesn't sound dire enough, in their annual report, the Social Security trustees said that Medicare's hospital insurance fund will be depleted in 2026, reserves for the fund that pays disability benefits would be emptied in 2032, and all Social Security reserves would be exhausted by 2034.

Medicare's Board of Trustees blamed the earlier depletion forecast on expectations of lower payroll taxes and less revenue from taxing Social Security benefits, both the result of the tax overhaul signed by President Donald Trump a year ago, according to a senior administration official.

In 16 years, Social Security will have to cut benefits by 21% if lawmakers do nothing to cure the program's long-term funding shortfall. The total annual cost of the OASDI program is projected to exceed total annual income in 2018 for the first time since 1982 and to remain higher throughout the 75-year projection period. Continuing payroll tax revenues to the combined trust funds would be sufficient to cover 79 percent of scheduled benefits starting in 2034.

When considered separately, the OASI trust fund is slightly worse off and the DI trust fund's outlook has improved since last year's report. This is because premium income and general revenue income are reset each year to cover the expected rise in costs.

President Trump pledged during the 2016 campaign to leave Social Security and Medicare benefits untouched, putting him on a crash course with Republicans on Capitol Hill who have said they wanted to tackle the programs' problems by limiting future benefit increases.


During 2017, 174 million people had earnings covered by Social Security and paid payroll taxes. During the same period, about 62 million people received benefits, including retired and disabled workers, their eligible family members and survivors of deceased workers.

Because Social Security is a main source of income for older Americans, that scenario could crimp household budgets for seniors and even push some into poverty.

"As in past years, the trustees have determined that the fund is not adequately financed over the next 10 years", the report said, citing in part lower payroll taxes collected on lowered wages in 2017 and rising hospital spending.

Most Social Security reform proposals call for a combination of increasing payroll taxes and cutting benefits, including recommendations to raise the full retirement age or scale back on inflation protections. The report says that income still needs to increase faster than the economy to cover future growth.

Other reports by Iphone Fresh

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