The news is not good, but it’s also not unexpected. Congress has been warned for over a decade and urged to act. There is no one to blame except the politicians of both parties. Even worse, some politicians seek more spending on SS before stabilizing the program as it is.
Democrats won’t mention any of this [state of SS and Medicare] as they try to add vision, dental and hearing benefits to Medicare and lower the qualfying age to 60 from 65. They also want to pass new entitlements such as national child care, free community college and universal pre-K. The Trustees report is shouting not to expand entitlements when you can’t pay for the ones you have, but today’s politicians don’t care. Source: WSJ 9-2- 21
Read this summary analysis by the CFRFB. You can also search this blog for past assessments of the problems we choose to ignore.
Analysis of the 2021 Social Security Trustees’ Report
The latest Social Security projections show the program is quickly headed toward insolvency and highlight the need for trust fund solutions sooner rather than later.
The Social Security Trustees found:
Social Security is Only 13 Years from Insolvency. Social Security cannot guarantee full benefits to current retirees under current law. The Trustees project the Social Security Old-Age and Survivors Insurance (OASI) trust fund will deplete its reserves by 2033 and the Social Security Disability Insurance (SSDI) trust fund will become insolvent by 2057.
The theoretical combined trust funds will exhaust their reserves by 2034, when today’s 54-year-olds reach the full retirement age and today’s youngest retirees turn 75. Upon insolvency, all beneficiaries will face a 22 percent across-the-board benefit cut.
Social Security Faces Large and Rising Imbalances. According to the Trustees, Social Security will run cash deficits of $2.4 trillion over the next decade, the equivalent of 2.3 percent of taxable payroll or 0.8 percent of Gross Domestic Product (GDP). Annual deficits will grow to nearly 5.0 percent of payroll (1.7 percent of GDP) by 2080 and total over 4.3 percent of payroll (1.4 percent of GDP) by 2095.
Social Security’s 75-year actuarial imbalance totals 3.54 percent of taxable payroll, which is 1.2 percent of GDP or nearly $21 trillion in present value terms.
Social Security’s Finances are Deteriorating. Social Security’s finances have worsened over the last year – insolvency is projected to occur a year earlier, and the 75-year actuarial deficit is over 10 percent larger. The 75-year shortfall is nearly 85 percent larger than it was projected to be in 2010.
Time is Running Out to Save Social Security. Lawmakers have only a few years left to restore solvency to the program, and the longer they wait, the larger and more costly the necessary adjustments will be. Acting now allows more policy options, lets policymakers phase in changes more gradually, and provides more time for workers to adjust their work and savings if necessary.
Given the short timeline to address the looming insolvency of Social Security – and of Medicare Hospital Insurance (addressed in a forthcoming companion paper) – policymakers should seize any opportunity to enact trust fund solutions.
Analysis of 2021 Medicare Trustees Report
The Medicare Trustees’ report shows that the Part A Hospital Insurance trust fund will be insolvent in just five years, the trust fund faces a shortfall of 0.77 to 1.61 percent of payroll, and Medicare spending will grow significantly over the next few decades. Specifically, the Medicare Trustees found that:
The Hospital Insurance (HI) Trust Fund is Only Five Years from Insolvency. The Trustees project the trust fund will be depleted by 2026, the same year they projected in their prior (pre-COVID) report. This is the closest the trust fund has been to insolvency since 1997.
The HI Trust Fund Faces a Large Shortfall. The Trustees project that HI spending will exceed revenue by $578 billion over the next decade. Over 75 years, they project a shortfall of 0.77 percent of payroll or 0.3 percent of Gross Domestic Product (GDP). This means that it would take about a 27 percent (0.77 percentage point) increase in the payroll tax rate or a 16 percent spending cut to ensure solvency.
Total Medicare Spending Is Projected to Grow Rapidly. The Trustees project that gross spending on Medicare Parts A, B, and D will grow from 4.1 percent of GDP in 2021 to above 6 percent by 2040 and stay at roughly 6.5 percent each year from 2070 onward.
Medicare’s Financial Outlook is Similar to Last Year. Despite the COVID-19 pandemic, the Trustees project few differences in the HI insolvency date, the 75-year shortfall, and overall Medicare costs.
Medicare’s Finances Would Be Worse Under an Alternative Scenario. The Medicare Chief Actuary produces an illustrative alternative scenario that assumes lawmakers update provider payment formulas over time so they remain sufficient to ensure continued Medicare beneficiary access. Under this scenario, total Medicare spending will grow to 8.5 percent of GDP in 2095 rather than 6.5 percent. The HI shortfall would be more than twice as large as the official projections at 1.61 percent of payroll.
The Trustees show that Medicare spending is projected to rise substantially and the HI trust fund is nearing insolvency. Health savings and trust fund solutionsare needed to slow cost growth and ensure Medicare continues to pay full benefits.