New Report Warns Medicare and Social Security Running Out of Cash

Desiree Burns
June 10, 2018

The Trump administration says Medicare is going to run out of money three years earlier than previously expected. Income to the Medicare fund is expected to be lower than estimated previous year because of "lower payroll taxes attributable to lowered wages in 2017 and lower levels of projected gross domestic product", the Treasury said in a "fact sheet" accompanying the report.

President Trump pledged during the 2016 campaign to leave Social Security and Medicare benefits untouched, putting him on a crash course with Republicans on Capitol Hill who have said they wanted to tackle the programs' problems by limiting future benefit increases.

In reality, it has been running annual deficits since 2010, and the insolvency date has moved up eight years.As the Social Security crisis keeps getting closer, the political parties are moving further away from doing anything about it.What's scary is that Social Security is relatively easy to fix when compared to Medicare, a program where the rising retirement population is interacting with growing healthcare costs. But, hey, they only need three-quarters of their food, home, and medical coverage, right?

Social Security spending, which amounted to 4.9 percent of GDP in 2017, will climb to 6.1 by 2038, an improvement over last year's forecast, which predict it would reach this level a year earlier.

Medicare Part B, and D will remain adequately funded "into the indefinite future", the trustees reported, because law provides financing from general revenues and beneficiary premiums each year to meet the next year's expected costs.

The trustees said this is the third year in a row that the near-term disability cost outlook significantly improved.

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The good news is, Social Security isn't projected to run short of funds any sooner than it was a year ago.

This is the first time that's happened since the Reagan admin. About a quarter of Part B costs are paid for by beneficiary premiums with the rest from the federal budget.

The annual funding update marks the first such report since Congress did away with that panel, which was created to cut Medicare costs if spending grew too fast. "The programs remain secure", he said. Mnuchin added that "long-term issues persist".

Despite looming shortfalls, U.S. Treasury Secretary Steven Mnuchin said accelerated economic growth under the current administration would help to bolster both programs' coffers in the coming years.

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.

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