A stronger-than-expected economic recovery from the pandemic has pushed back the go-broke dates for Social Security and Medicare, but officials warn that the current economic turbulence is putting additional pressures on the bedrock retirement programs.
The annual Social Security and Medicare trustees report released Thursday says Social Security’s trust fund will be unable to pay full benefits in 2035, instead of last year's estimate of 2034. The year before that it estimated an exhaustion date of 2035.
The projected depletion date for Medicare’s trust fund for inpatient hospital care moved back two years to 2028 from last year’s forecast of 2026.
“Economic recovery from the 2020 recession has been stronger and faster than assumed in last year’s reports, with positive effects on the projected actuarial status of the trust funds in these reports,” the report states.
Forecasters said in the report released Thursday that the ongoing COVID-19 pandemic will have no net effect on their long-range projections. But they also noted that assumptions for their latest report were made in February, which was before cases began climbing again nationally and inflation jumped.
Social Security pays benefits to more than 65 million Americans, mainly retirees as well as disabled people and survivors of deceased workers. Medicare covers roughly 64 million older and disabled people.
Income for Medicare’s hospital insurance fund is projected to be higher than estimates from last year because the number of covered workers who help fund it and their average wages are both expected to be higher.
A main source of financing is payroll taxes on earnings paid by employees and employers. About 183 million people paid those taxes in 2021.
The report projects the Medicare “Part B” premium for outpatient coverage to remain stable at $170.10 a month. But administration officials said that projection, based on information from earlier this year, doesn’t reflect an expected drop due to an overestimation of the cost of covering the Alzheimer’s treatment Aduhelm.
The impact of the economic recovery on the trust funds has been resoundingly positive, which was stronger and faster than expected, a Treasury official said Thursday on the condition of anonymity during a call with reporters.
The trustees of Social Security and Medicare include the secretaries of Treasury, Health and Human Services, and Labor, as well as the Social Security commissioner. They are supposed to be joined by two “public trustees,” however those positions are currently vacant.
A representative from the White House did not respond to an email inquiry about whether the president intends to nominate new public trustees.
The trustees report is an added reminder of the U.S. government’s financial troubles, as it juggles historically high inflation, recovery from a pandemic and the war in Ukraine.
There was some good news for retirees, however. This year, Social Security retirees got a 5.9% boost in benefits this year, which was the biggest cost-of-living adjustment, also known as COLA, in 39 years.
Ron Thompson Jr, a 24 year-old D.C. resident, says this year’s cost of living increase has been “transformational” as a trickle-down benefit to his family, as he helps take care of his 77 year-old grandmother, who lives on the other side of town.
Transportation costs, which has surged due to high inflation, have made it difficult for Thompson and his mother to drive to take care of his grandmother.
“All of us have experienced high costs,” Thompson said. Because his grandmother can pass on some of her Social Security benefits to her daughter to help pay for gasoline costs, “the adjustment is a cushion my mom can rest on” as she travels to care for Thompson’s grandmother.
A Treasury official said this year's high inflation could prompt an 8% percent increase in benefits next year.
A new Congressional Budget Office report states that the biggest drivers of debt rising in relation to GDP are increasing interest costs and spending for Medicare and Social Security. An aging population drives those numbers.
Charles Balhous, a senior economic adviser to former President George W. Bush and a public trustee of Social Security and Medicare during the Obama administration, told The Associated Press that “the first thing that’s important to do is grasp the baseline, it’s very dire,” he said.
Balhous says failing to finance Social Security and Medicare under its current structure “would subject the programs to perpetual renegotiation,” with the threat of benefit cuts or elimination in the future.
“If we were to wait until the 2030s” to take action, “the annual shortfall would be so large — so many times larger that it’s not possible to fathom."
