By Ricardo Alonzo-Zaldivar and Andrew Taylor AP BCS EAGLE Wednesday , June 6, 2018.
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 check upon the programs vital to the middle class.
The report from the program trustees says Medicare will become insolvent in 2026--three years earlier than previously forecast. It's giant trust fund for inpatient care wont be able to fully co
ver 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 the major issue to languish while Washington plunges deeper into partisan strife. Because of the deterioration in Medicare's finances, official 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 is time to fix the problems. "The programs remain secure," Mnuchin said, Medicare "is on track to meet it 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% next year, said government number crunchers who produced this report. That works out to be about $31. a month.
At the same time, the monthly Medicare "Part B" premium for out-patient care paid by most beneficiaries is projected to rise by about $1.50-$135.50.
Both the cost-of-living increase and the Medicare outpatient premium are not 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 the beneficiaries Medicare provides health insurance for about 60 million, most of whom are age 65 and 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 of employed, Social Security and Medicare account for about 40 percent of the 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 the promised benefits. With Social Security that could mean sharply reduced payments on tight budgets. The report says that the total annual cost of Social Security is projected to exceed total annual income for the first time since the Reagan era, meaning the program will have to tap into reserves.
For Medicare, insolvency would mean the hospitals, nursing homes and other provides of medical care would be paid only a 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 is also unpredictability of health care costs which can be jolted by high priced breakthrough cures, and which regularly outpace the overall rate of economic growth.