WASHINGTON – Washington has less than a decade to shore up Medicare’s finances and not much longer to fix a looming shortfall in Social Security, according to the annual Social Security and Medicare trustees report released Friday.
The update – which shows a slightly improved situation for Medicare and slightly worse one for Social Security since last year’s report – comes as President Joe Biden and congressional Republicans are in a standoff over the nation’s spending.
The Social Security Old-Age and Survivors Insurance Trust Fund, which pays retiree benefits, won’t be able to pay full benefits after 2033. Medicare will run short of what it needs for inpatient hospital care after 2031, according to the report.
Medicare and Social Security are large drivers of the federal budget because of an aging population and rising health care costs.
But both programs are widely popular and ways of fixing them – raising taxes or reducing benefits – are not.
Biden has offered a plan that includes higher taxes on the wealthy to extend Medicare’s hospital-insurance fund for at least 25 years.
Republicans have rejected raising taxes to shore up either program. But they have not offered a way to keep the programs flush enough to continue paying full benefits after the trust funds are depleted.
Experts warn that the longer the problem is ignored, the harder it will be to address.
“The trustees continue to recommend that Congress address the projected trust fund shortfalls in a timely fashion to phase in necessary changes gradually,” said Kilolo Kijakazi, acting commissioner of Social Security. “With informed discussion, creative thinking, and timely legislative action, Social Security can continue to protect future generations.”
What is Biden’s plan for Social Security and Medicare?
In the budget Biden released in March, he proposed raising taxes on people earning more than $400,000 a year.
Biden would increase the top rate of the Medicare payroll tax and the net investment income tax to 5% for those high-income taxpayers. He would also expand the net investment income tax to apply to more types of income and divert revenues to help Medicare. That tax, created as part of the 2010 Affordable Care Act, currently raises general funds.
The White House contends it was always meant to boost Medicare. But while making that change will help Medicare, it would reduce income for other government programs.
Biden’s budget did not address the future shortfall in Social Security funding. Instead, Biden only said that he’s opposed to cutting benefits
What is the Republican plan for Social Security and Medicare?
The GOP-led House Budget Committee said in a budget framework released in February they want to “save and strengthen” Social Security and Medicare but didn’t say how.
A budget released by House conservatives last year proposed slowly increasing the eligibility age to reflect that life expectancy has increased since the program began. Benefits would also go up for lower-income workers and down for higher earners.
The issue has divided Republicans eyeing their party’s 2024 presidential nomination.
“Under no circumstances should Republicans vote to cut a single penny from Medicare or Social Security,” former President Donald Trump said in January.
Trump’s former vice president, Mike Pence, has said cuts should be “on the table for the long term.”
“We can introduce common sense reforms that will never touch anyone who is in retirement, or anyone who will retire in the next 25 years,” Pence said earlier this month.
Former South Carolina Gov. Nikki Haley wants to raise the retirement age for young workers and limit benefits for higher-income retirees.
What do surveys show?
- Eight in ten adults have favorable views of Social Security and Medicare, according to a survey released Thursday by the nonpartisan Kaiser Family Foundation, a health policy research organization.
- About three-fourths of adults say changes are needed to keep Medicare sustainable. Older adults are less willing to want changes.
- Independents are more likely to trust Democrats than Republicans to determine the futures of the programs.
- In a separate survey by Quinnipiac University also released Thursday, 78% would oppose raising the full retirement age for Social Security from 67 to 70. When asked if they would support that change if it mean benefits would last longer, a majority – 62% – still opposed it.
Contributing: Associated Press.