The U.S. Social Security Trust Funds will be exhausted in 2036, and Medicare HI (hospital insurance) Trust Funds will reach exhaustion in 2024, according to a report released last week by the Social Security and Medicare Board of Trustees. The Social Security projection is one year sooner than previously estimated, and for Medicare the projection is five years earlier than previously thought.
The Social Security funds together include the Old-Age and Survivors Insurance and Disability Insurance (OASDI) funds. When they are exhausted in 2036, there will be sufficient non-interest income covering 77% of scheduled benefits.
Source: Social Security Administration
“The current Trustees Report again reflects what we have long known to be true—we need changes to ensure the long-term solvency of Social Security and to restore younger workers’ confidence in the program,” said Michael J. Astrue, commissioner of Social Security. “The report also highlights the more near-term shortfall in the Disability Insurance Trust Fund. Our disability programs are complex, and there is a long history of well intended ‘reforms’ causing unintended consequences. The President sent to Congress our Work Incentive Simplification Proposal, which would be a good start for bipartisan debate. I urge the House and Senate to review this proposed legislation carefully and schedule hearings this year.”
In 2010, Social Security paid benefits of $702 billion to approximately 54 million beneficiaries, the report found.
For Medicare, the costs (including HI and Supplementary Medical Insurance, or SMI) will grow over time and while the shortfall is more immediate, the long term financial outlook is better, according to the report. Medicare HI costs under the wave of baby boomers receiving benefits through the program are projected to grow from approximately 3.6% of GDP in 2010 to 5.5% of GDP by 2035, and to increase gradually thereafter to about 6.2% of GDP by 2085, according to the report.
“The financial challenges facing Social Security and Medicare should be addressed soon,” the report states. “If action is taken sooner rather than later, more options and more time will be available to phase in changes so that those affected can adequately prepare.”
View a summary of the Social Security and Medicare reports.
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Written by Elizabeth Ecker