8 things to know about Medicare and Social Security trust funds

8 things to know about Medicare and Social Security trust funds

News Services
May 13, 2011

The bad economy has shortened the life of the trust funds that support Social Security and Medicare, the nation's two biggest benefit programs, the government reported Friday. Here are eight things to know about the new estimate:

1. What is the new estimate? Medicare could begin running a deficit in 2024, five years earlier than projected last year. And Social Security, which last year began paying out more in benefits than it collected in taxes, now faces insolvency in 2036, compared to 2037 in last year's projections.

2. Why the change? The trustees said the new estimate is because of a weaker economy, which means fewer people working and paying payroll taxes into the fund, and continued increases in health care costs. Last year's report had extended the life of the Medicare fund by 12 years to reflect the savings that were included in the health care overhaul. Without the changes in health care law, the administration said, the Medicare trust fund would be exhausted in 2016. The savings in the health care legislation are still included in the projections but have been updated to reflect economic data over the past year.

3. What it means: Many experts believe that the outlook for Medicare is actually worse because the trustees' projections assume deep cuts in payments to doctors that Congress has routinely waived, and because other cost savings from the health care law will be difficult to realize. The report increases pressure on Congress to make changes soon. The longer lawmakers wait, the more likely they will be forced to impose steep tax increases, deep benefit cuts, or both, to save the programs. By acting sooner, the trustees who oversee the two programs said, Congress can impose gradual changes that don't hurt current beneficiaries and give future retirees time to prepare.

4. Who gets the benefits? Nearly 55 million retirees, disabled people and children who have lost parents receive Social Security benefits, which average $1,077 monthly. Medicare, the U.S. health insurance program for the elderly and disabled, covers more than 46 million people.

5. Will there be a cost of living increase? The report projected that the millions of Social Security recipients would receive a small -- 0.7 percent -- cost of living increase in their benefit checks in 2012. In 2010 and 2011, there were no cost of living increases in the checks because inflation was low. A 0.7 percent increase would not be seen by many beneficiaries because the extra money would be eaten up by higher insurance premium payments for Medicare. The actual benefit increase will be determined based on the performance of the government's Consumer Price Index. That figure will be released in October.

6. What would it take to stay solvent? Medicare, to stay solvent for the next 75 years, would have to immediately raise payroll taxes by 24 percent, or cut current benefit payments by 17 percent, said Cori Uccello, a senior health fellow with the American Academy of Actuaries in Washington.

7. What's the political debate about? Democrats and Republicans agree that Medicare must be addressed soon, but the consensus ends there, even as a bipartisan group of lawmakers is holding talks on ways to tackle the nation's mounting debt. Changes to Medicare could be part of an agreement to increase the debt ceiling with most Republicans and some Democrats saying they won't vote to increase the government's ability to borrow without significant spending cuts. The government is expected to reach its borrowing limit of $14.3 trillion soon. Treasury Secretary and trustee Tim Geithner urged Congress to "move as quickly as possible" to raise the borrowing limit. He has told lawmakers that he can take steps to delay until Aug. 2 what would be an unprecedented default on the debt.

Meanwhile, Social Security appears to be off the table. Many Democrats, including Senate Majority Leader Harry Reid, D-Nev., have been adamant that they will not support cuts in Social Security benefits, even if they target only future retirees. Senate Republican leader Mitch McConnell acknowledged that changes to Social Security won't be part of any agreement.

8. What will happen if Congress does not act? The Social Security trust fund that finances aid to about 10 million disabled Americans and their dependents will be the first to dry up, with funding scheduled to run out in 2018, trustees said. The fund, when combined with a separate and much larger trust fund paying benefits to seniors, has enough money to stay solvent until 2036. Social Security law requires program spending to match revenue, so a lack of action by lawmakers by that time will mean benefits will have to be cut 23 percent or the Social Security payroll tax increased to 16 percent, or a combination, the report said. A U.S. delay in extending Medicare's fiscal life may force cuts for current beneficiaries rather than diminishing them for people who enter the program several years from now.

Meanwhile, Social Security appears to be off the table. Many Democrats, including Senate Majority Leader Harry Reid, D-Nev., have been adamant that they will not support cuts in Social Security benefits, even if they target only future retirees. Senate Republican leader Mitch McConnell acknowledged that changes to Social Security won't be part of any agreement.

What filth we have in DC. These guys are so insulated from reality. The gall that there will be no cuts, yet we have this paragraph that says things will take a shit if something isn't done.

8. What will happen if Congress does not act? The Social Security trust fund that finances aid to about 10 million disabled Americans and their dependents will be the first to dry up, with funding scheduled to run out in 2018, trustees said. The fund, when combined with a separate and much larger trust fund paying benefits to seniors, has enough money to stay solvent until 2036. Social Security law requires program spending to match revenue, so a lack of action by lawmakers by that time will mean benefits will have to be cut 23 percent or the Social Security payroll tax increased to 16 percent, or a combination, the report said. A U.S. delay in extending Medicare's fiscal life may force cuts for current beneficiaries rather than diminishing them for people who enter the program several years from now.

In 1935, 65 was beyond life expectancy. Now it's only 82%. People are eligible for benefits for nearly a fifth of their life now.

The age of social security eligibility should be a moving target that follows life expectancy as it improves. Right now, it should be 81.

Of course, enacting that change is a political impossibility.

kronos wrote:In 1935, 65 was beyond life expectancy. Now it's only 82%. People are eligible for benefits for nearly a fifth of their life now.

The age of social security eligibility should be a moving target that follows life expectancy as it improves. Right now, it should be 81.

Of course, enacting that change is a political impossibility.

The whole thing is a huge piece of shit. One day there will be none for those of us that are on the upward swing. Then we can blame it on the assholes in DC (over the decades) of both parties.

The thing that really irritates me about SS is this:

1) I don't have a choice in the matter as to contributing. I have to contribute. If the predictions are true, all of my money will be non-existent in 15 or 20 years. Everything I paid into it will be gone.

2) If I die tomorrow, the money is gone. It became the gov'ts (and they already spent it anyway).

3) If I die, I can't decide who gets my SS money. Again, it belongs to the gov't.

4) If I'm married and I get $1,200 a month from SS and my wife gets $900 and then I die, she gets my check for $1,200. Hers becomes non-existent. Again, another boon for the gov't.

TexasBlue wrote:1) I don't have a choice in the matter as to contributing. I have to contribute.

I wouldn't mind this if 1) there weren't so many beneficiaries that didn't need the benefits*, and 2) if I were assured of receiving same when I'm old enough to really need them. But I have no such assurance. It's impossible that the current system will be in place by the time I'm 65.

*Rationale: 1a) life expectancy has improved to the point that 65 is no longer old; 1b) the benefits keep 40% of 65+-year-olds out of poverty, which means 60% don't need it.

I agree in a sense. Those that don't need the bennies shouldn't have to pay in, imo.

Where the fuck is everybody? Do I have to close this place to make a point??????

Well I don't really care about SS, but I think every country needs an efficient system like SS that takes care of its elderly, sick, etc. Social Security just isn't very efficient....

TexasBlue wrote:Where the fuck is everybody? Do I have to close this place to make a point??????

I think everyone here has the right to take time off. The problem isn't that they're doing so, it's that there's no one to fill the void. I used to be gone form Superior Pics for months at time, and no one would notice because there were more than enough people to pick up my slack. Not so here. This board has 6 regular members. Fresh blood is in order.

BubbleBliss wrote:
Well I don't really care about SS, but I think every country needs an efficient system like SS that takes care of its elderly, sick, etc. Social Security just isn't very efficient....

That's what Medicare does (elderly health care) and Medicaid (poor folks health care).

Neither SS, Medicare nor Medicaid is efficient at all. They're very inefficient (fraud, etc).

TexasBlue wrote:I agree in a sense. Those that don't need the bennies shouldn't have to pay in, imo.

Well, but those who really do need the bennies can't work (that's the whole point--that people who can't work don't starve). So how would the bennies be paid for?

I'm not defending the current system by asking this. I'm interested in alternatives.

kronos wrote:

TexasBlue wrote:Where the fuck is everybody? Do I have to close this place to make a point??????

I think everyone here has the right to take time off. The problem isn't that they're doing so, it's that there's no one to fill the void. I used to be gone form Superior Pics for months at time, and no one would notice because there were more than enough people to pick up my slack. Not so here. This board has 6 regular members. Fresh blood is in order.

Yeah, I've tried recruiting and got a few. They join and never post (or post once or twice). ags4ever, Alchemist-123, breuillesec, crystalbay and digiserv66 are recent joins I knew from other places. Except for Crystal, the rest never even bothered to cruise the board. Join and leave.

kronos wrote:

TexasBlue wrote:I agree in a sense. Those that don't need the bennies shouldn't have to pay in, imo.

Well, but those who really do need the bennies can't work (that's the whole point--that people who can't work don't starve). So how would the bennies be paid for?

I'm not defending the current system by asking this. I'm interested in alternatives.

I'm basing it all on my Libertarian bent. I feel that those who pay in should get the bennies whether they need them or not. If they don't, then they shouldn't have to pay in.

The whole system needs a massive overhaul, big time. It's gotten to the point that all 3 of those bennies will cease to exist in due time. Then people will be bitching like no tomorrow.

TexasBlue wrote:Where the fuck is everybody? Do I have to close this place to make a point??????

Sorry Tex, I've been out and about all weekend. Plus, I'm still having occasional connection problems.

The_Amber_Spyglass wrote:

TexasBlue wrote:Where the fuck is everybody? Do I have to close this place to make a point??????

Sorry Tex, I've been out and about all weekend. Plus, I'm still having occasional connection problems.

Just ranting.

Yeah, I know. Been quiet the last week or so.

Not much one can do about it either.

TexasBlue wrote:

BubbleBliss wrote:
Well I don't really care about SS, but I think every country needs an efficient system like SS that takes care of its elderly, sick, etc. Social Security just isn't very efficient....

That's what Medicare does (elderly health care) and Medicaid (poor folks health care).

Neither SS, Medicare nor Medicaid is efficient at all. They're very inefficient (fraud, etc).

Well all of those kind of programs are crucial for a free society. Part of democracy is that everybody contributes for the benefit of society.

BubbleBliss wrote:

TexasBlue wrote:

BubbleBliss wrote:
Well I don't really care about SS, but I think every country needs an efficient system like SS that takes care of its elderly, sick, etc. Social Security just isn't very efficient....

That's what Medicare does (elderly health care) and Medicaid (poor folks health care).

Neither SS, Medicare nor Medicaid is efficient at all. They're very inefficient (fraud, etc).

Well all of those kind of programs are crucial for a free society. Part of democracy is that everybody contributes for the benefit of society.

That's not the point. The point is how badly they're run and how badly they have been run in the past decades. It's to the point that these programs will be insolvent in the near future. Then nobody gets anything. How's that for fun?

The problem I have is that it seems to me that a lot of Conservatives call for the abolishment of these kind of programs. It's really not that hard to run these kind of programms efficiently, countries a lot less developed than the US can manage it.

BubbleBliss wrote:
The problem I have is that it seems to me that a lot of Conservatives call for the abolishment of these kind of programs.

Who? Show me.

BubbleBliss wrote:It's really not that hard to run these kind of programs efficiently, countries a lot less developed than the US can manage it.

Apparently, we can't.... and haven't.

The problem here is the massive amounts of spending that these programs eat up out of the federal budget. Between these three, they are a larger budget than defense spending is.

You hear whining from the right about the costs of these programs all the time, but you never hear them suggest an alternative.

That statement is just sad... that the US can't get something so simple right.

You've lived over there Bubblebliss, why do you think their system is so inefficient? What is their system getting wrong that seems to work in Europe (I refer back to the WHO report I've posted a few times now)?

BubbleBliss wrote:
You hear whining from the right about the costs of these programs all the time, but you never hear them suggest an alternative.

Now you're making things up. Of course there has been alternatives offered. They all are shot down. They will continue to be shot down until these entitlements get driven into the ground (insolvency). Then people will change their tunes.

BubbleBliss wrote:That statement is just sad... that the US can't get something so simple right.

It's the politicians. That's the problem.

The_Amber_Spyglass wrote:You've lived over there Bubblebliss, why do you think their system is so inefficient? What is their system getting wrong that seems to work in Europe (I refer back to the WHO report I've posted a few times now)?

I know this was for Bubbles but I'll add my take (again). Politics, politicians and a corrupt system.