Associated Press June 7, 2018
WASHINGTON (AP) — 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 — 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 — 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 Securityor 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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