Medicare Fund to Fall Short in 2026, Sooner Than Last Forecast

Social Security and Medicare trustees confirm GOP policies have hurt both programs

Shown are the headquarters of the Social Security Administration in Maryland

Medicare and Social Security are running out of money more quickly than expected, officials said Tuesday.

Last year, the board's findings showed Medicare's finances to be in slightly better shape than previously projected, with the hospital insurance trust fund remaining solvent until 2029.

The report did not change its insolvency date for Social Security, projecting it has enough funding until 2034.

Trump administration officials instead are counting on a strong economy to improve the solvency of Social Security and Medicare.

"Our estimate could change, because we still have several months of CPI data to go before the COLA is announced in October", Mary Johnson, The Senior Citizens League's Social Security policy analyst, said in a statement. But, hey, they only need three-quarters of their food, home, and medical coverage, right?

"However, certain long-term issues persist", the statement added. Medicare spent $710 billion in 2017, according to the report, making it the single biggest purchaser of health services in the U.S. The trustees include Treasury Secretary Steven Mnuchin and Health and Human Services Secretary Alex Azar.

The report said the less favorable outlook for Medicare's hospital trust fund resulted from "adverse changes" in program income and costs.

The combined Social Security trust funds are slated to run dry in 2034, and that will force benefits to be cut more than 20 percent. "Lack-luster economic growth in previous years, coupled with an aging population, has contributed to the projected shortages for both Social Security and Medicare".

Higher deficits would leave less maneuvering room for policymakers when the day of reckoning finally arrives for Social Security and Medicare.

Of the two programs, Medicare faces the greatest fiscal challenges as medical costs increase and the U.S. ages, with many baby boomers set to retire in the next several years. At that point Social Security will be able to pay only 79% in promised benefits to retirees and disabled beneficiaries. It will decline further to about 2.2 by 2035, when most baby boomers will have retired, officials said. The number of Medicare beneficiaries is expected to surge to 89 million in 2040 from 60 million today, according to Medicare actuaries.

Meanwhile, the trustees project that both Medicare Part B outpatient care and the Part D prescription drug program will remain adequately financed into the "indefinite future" with money from general revenues and beneficiary premiums.

Total Medicare costs will grow from approximately 3.7% of GDP in 2017 to 5.8% of GDP by 2038.

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