FDR signs the Social Security Act in 1935/Photo courtesy of Children's Bureau Centennial
Yesterday the trustees of two key social insurance programs - Social Security and Medicare - released their annual reports projecting the future of the programs’ finances. What’s so special about these reports is that they consider the future of Social Security and Medicare 75 years into the future – something no other federal program does. Here’s what you need to know:
The Medicare Trustees Report found that Medicare’s hospital insurance trust fund (Part A) is fully solvent until 2030, the same projection the trustees put forward last year. If no changes are made to the program before 2030, Medicare Part A payroll taxes and other revenue would be able to cover 86 percent of payments in 2030 and would slowly decline after that.
The Social Security Trustees Report found that together, the retirement and survivor’s benefits (OASI) and disability benefits (DI) are fully funded until 2034, one year longer than the trustees put forward last year. If Congress makes no changes to the Social Security program, revenues that come in from payroll taxes and other sources will be able to cover 100 percent of benefits until 2034 and 79 percent of benefits after that.
Yes, the disability insurance program’s trust fund becomes insolvent next year – in late 2016 – but we've known about it for a while. How is this possible when the overall Social Security trust fund is solvent until 2034? It’s because though the retirement and survivor’s program and disability program are often considered in conjunction, as noted in #2, they are actually two separate programs with their own trust funds.
So, once the disability trust fund is depleted, it will only be able to cover 81 percent of scheduled benefits. In order to prevent a 19 percent cut in disability benefits next year, Congress will likely need to temporarily reallocate some payroll tax revenue from the retirement and survivor’s program to the disability program, a step that’s been taken 11 times in the past.
Check out our new publication, Highlights from the 2015 Social Security and Medicare Trustees Reports.
Whether you’re one of the 10,000 baby boomers turning 65 every day or are a young person who has been touched by Social Security or Medicare – or the many other federal programs we have – tell us your story.