Virus Throws Uncertainty on Social Security, Medicare Forecasts
(Bloomberg Law) -- The trust fund that pays Medicare inpatient hospital costs will be able to pay scheduled benefits until 2026, the same as last year’s projection, according to a federal report. But how the Covid-19 outbreak affects that remains to be seen.
The findings from the Social Security and Medicare Boards of Trustees’ annual report don’t reflect the impact of the ongoing pandemic, but the report provides an illuminating under-the-hood look at the nation’s two largest entitlement programs. Medicare and Social Security together accounted for 41% of total federal expenditures in fiscal 2019.
Social Security can pay full benefits until 2034 when the program’s Old-Age and Survivors Insurance Trust Fund is projected to become depleted—the same as was projected last year—with tax revenue covering only 76% of scheduled benefits, according to the report.
Social Security’s Disability Insurance Trust Fund has gotten stronger due to a decade-long decline in disabled-worker applications that has allowed the fund to pay benefits until 2065, or 13 years later than was projected in 2019.
Together, the combined old-age and disability trust fund reserves for Social Security are projected to be depleted in 2035, the same year as projected in 2019.
In 2020, both programs are projected to equal 8.8% of gross domestic product. That would increase to 11.6% of GDP by 2035, with most of the increase attributable to Medicare.
But both programs face an unsustainable future at current funding levels due to a coming wave of baby boomers and a projected decline in the U.S. workforce, whose taxes fund both programs.
Covid-19 Impact Uncertain
Senior administration officials said it’s too soon to predict what the overall effect of the pandemic will be on the Medicare program.
Spending could increase due to the disproportionate impact that Covid-19 is having on older Americans, or it could decline due to a slowdown in elective and nonessential surgeries and medical procedures.
The depth and duration of the pandemic is yet undetermined, but the recession that’s likely to result will mean fewer jobs and fewer people paying into both Medicare and Social Security.
Congress could reduce or eliminate Medicare and Social Security’s long-term funding in any number of ways, including raising taxes or program lowering spending.
“Lawmakers should address these financial challenges as soon as possible,” the trustees’ report urges. “Taking action sooner rather than later will permit consideration of a broader range of solutions and provide more time to phase in changes so that the public has adequate time to prepare.”
©2020 Bloomberg L.P.