The financial outlook for Social Security is eroding more quickly than previously expected, as the coronavirus pandemic has drained government revenues and put additional strain on one of the nation\u2019s most important social safety net programs. The overall finances for Medicare, however, are expected to hold steady, though the health program is still forecast to face financial pressure in the coming years.<\/p>\n
Annual government reports released on Tuesday on the solvency of the programs underscored the questions about their long-term viability at a time when a wave of baby boomers are retiring and the economy faces ongoing uncertainty as variants of the coronavirus surge. The United States economy already faces soaring federal debt levels in the coming decades, but both Democrats and Republicans have been wary of making significant structural reforms to the popular programs.<\/p>\n
\u201cHaving strong Social Security and Medicare programs is essential in order to ensure a secure retirement for all Americans, especially for our most vulnerable populations,\u201d Treasury Secretary Janet L. Yellen said in a statement. \u201cThe Biden-Harris administration is committed to safeguarding these programs and ensuring they continue to deliver economic security and health care to older Americans.\u201d<\/p>\n
Senior administration officials said that the long-term effects of the pandemic on the programs are unclear. The actuaries were forced to make assumptions about how long Covid would continue to cause unusual patterns of hospitalizations and deaths and whether it would contribute to long-term disabilities among survivors.<\/p>\n
The Social Security Old-Age and Survivors Insurance Trust Fund will now be depleted in 2033, a year earlier than previously projected, according to the report. At that time, the trust fund will run out of reserves and the program will be insolvent, with new tax revenues failing to cover scheduled payments. The report estimated that 76 percent of scheduled benefits will be able to be paid out unless Congress changes the rules to allow full payouts.<\/p>\n
The Disability Insurance Trust Fund is now expected to be depleted by 2057, which is eight years earlier than previously thought, at which time 91 percent of benefits will be paid.<\/p>\n
Medicare\u2019s finances are effectively holding steady. While tax revenue for the Medicare program did decline as a result of the Covid-related recession, Medicare also ended up spending less money than usual last year, as people avoided elective care.<\/p>\n
Medicare\u2019s hospital trust fund is projected to be unable to pay all of its bills beginning in 2026. This estimate is similar to those from Medicare\u2019s trustees in recent years. Fixing that gap now could be achieved by increasing the Medicare payroll tax rate from 2.9 percent to 3.67 percent or by reducing Medicare spending by 16 percent each year, the report notes.<\/p>\n
But the report highlighted that the official estimate may be unrealistically optimistic. If certain policies set to expire in the next 10 years are extended, or if other expected policy changes occur, the projections would look substantially more worrying.<\/p>\n
Long term, the actuaries said they did not think Covid-19 itself would have substantial influence on Medicare spending on hospital care. On the one hand, the death of many vulnerable, older Americans from the virus may reduce future spending they would otherwise have received. On the other, the actuaries expect that some people may have additional health care needs from the syndrome known as long Covid.<\/p>\n
The 2022 fiscal year for the federal government begins on October 1, and President Biden has revealed what he\u2019d like to spend, starting then. But any spending requires approval from both chambers of Congress. Here\u2019s what the plan includes:<\/p>\n