WASHINGTON (AP) Ñ
Medicare will run out of money sooner than expected, and Social Security’s
financial problems can’t be ignored either, the government said Tuesday in a
sobering checkup on programs vital to the middle class.
The report from
program trustees says Medicare will become insolvent in 2026 Ñ three years
earlier than previously forecast. Its giant trust fund for inpatient care
won’t be able to fully cover projected medical bills starting at that point.
The report says
Social Security will become insolvent in 2034 Ñ no change from the
projection last year.
The warning serves
as a reminder of major issues still languishing while Washington plunges
deeper into partisan strife. Because of the deterioration in Medicare’s
finances, officials said the Trump administration will be required by law to
send Congress a plan next year to address the problems, after the
president’s budget is submitted.
Treasury Secretary
Steven Mnuchin said in a statement that there’s time to fix the problems.
“The programs remain secure,” Mnuchin said. Medicare “is on track to meet
its obligations to beneficiaries well into the next decade.”
“However, certain
long-term issues persist,” the statement added. “Lack-luster economic growth
in previous years, coupled with an aging population, has contributed to the
projected shortages for both Social Security and Medicare.”
Social Security
recipients are likely to see a cost of living increase of about 2.4 percent
next year, said government number-crunchers who produced the report. That
works out to about $31 a month.
At the same time,
the monthly Medicare “Part B” premium for outpatient care paid by most
beneficiaries is projected to rise by about $1.50, to $135.50.
Both the
cost-of-living increase and the Medicare outpatient premium are not
officially determined until later in the year, and the initial projections
can change.
More than 62
million retirees, disabled workers, spouses and surviving children receive
Social Security benefits. The average monthly payment is $1,294 for all
beneficiaries. Medicare provides health insurance for about 60 million
people, most of whom are age 65 or older.
Together the two
programs have been credited with dramatically reducing poverty among older
people and extending life expectancy for Americans. Financed with payroll
taxes collected from workers and employers, Social Security and Medicare
account for about 40 percent of government spending, excluding interest on
the federal debt.
But demands on both
programs are increasing as America ages.
Unless lawmakers
act, both programs face the prospect of being unable to cover the full cost
of promised benefits. With Social Security that could mean sharply reduced
payments for retirees, many of whom are already on tight budgets. The report
said the total annual cost of Social Security is projected to exceed total
annual income in 2018 for the first time since the Reagan era, meaning the
program will have to tap into reserves.
For Medicare,
insolvency would mean that hospitals, nursing homes and other providers of
medical care would be paid only part of their agreed-upon fees.
Medicare is widely
seen as a more difficult problem that goes beyond the growing number of baby
boomers retiring. It’s also the unpredictability of health care costs, which
can be jolted by high-priced breakthrough cures, and which regularly outpace
the overall rate of economic growth.
The Cabinet
secretaries for Treasury, Health and Human Services, and Labor usually
participate in the annual release of the report, along with the Social
Security commissioner, and take questions from reporters. None of those top
officials was present Tuesday; an aide cited scheduling conflicts.
The four top
officials serve as the Social Security and Medicare trustees, along with two
independent trustees who are supposed to represent the public. The public
trustees are usually more candid, but those posts remain unfilled.
President Donald
Trump campaigned on a promise not to cut Social Security or Medicare, but he
hasn’t offered a blueprint for either program.
Democrats,
meanwhile, want to extend the social safety net by spending more on health
care and education. Advocates for the elderly said Tuesday there should be
no cuts to Social Security benefits.
But federal
deficits keep rising, and the recent Republican tax-cut bill is expected to
add to the debt.
Last year’s tax
law, which cut taxes on Social Security benefits, helped exacerbate the
shortfall. So too did repeal of the individual mandate in so-called
Obamacare, which promises to increase the number of people without health
insurance and therefore Medicare payments for uncompensated medical care.
Higher deficits
mean less maneuvering room for policymakers when the day of reckoning
finally arrives for Social Security and Medicare.
In principle, the
U.S. is supposed to be paying forward its Social Security and Medicare
obligations by building up trust funds to cover future costs. That money is
invested in special government securities, which also collect interest. But
when the money is actually needed to pay for benefits, economists say a
government deep in debt could be hard pressed to make good.
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