Medicine

Medicare to Become Insolvent In 8 Years, Social Security in 16

Medicare to Become Insolvent In 8 Years, Social Security in 16

Medicare's main trust fund will also run out of money sooner than anticipated, with insolvency looming in 2026, or three years earlier than last year's projection, the trustees said.

Meanwhile, Medicare's hospital insurance trust fund is expected to run dry in 2026, three years earlier than what the trustees had predicted in last year's report.

The Social Security program will pass an ugly milestone this year, as its costs exceed its income, according to its trustees. Good advisors have been factoring uncertainty around Social Security into their clients' plans for many years now. It's also the unpredictability of health care costs, which can be jolted by high-priced breakthrough cures, and which regularly outpace the overall rate of economic growth.

Of the two programs, Medicare faces the greatest fiscal challenges as medical costs increase and the U.S. ages, with many baby boomers set to retire in the next several years.

Social Security recipients are likely to see a cost of living increase of about 2.4 percent next year, working out to roughly $31 a month, government experts said.

The Cabinet secretaries for Treasury, Health and Human Services, and Labor usually participate in the annual release of the report on Social Security and Medicare, along with the Social Security commissioner, and take questions from reporters. The public trustees are usually more candid, but those posts remain unfilled.

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Democrats have for months asserted that Republicans would use the deficit - swollen by tax cuts - as "an excuse to cut Social Security and Medicare", in the words of Senator Chuck Schumer of NY, the Democratic leader.

But speaking to reporters on Tuesday, Treasury officials said the cuts were set to decrease revenues for both programs.

Democrats want to expand the safety net by spending more on health care and education.

Most Social Security reform proposals call for a combination of increasing payroll taxes and cutting benefits, including recommendations to raise the full retirement age or scale back on inflation protections.

The Congressional Budget Office said in April that federal deficits and debt would soar in the coming decade, following passage of the tax overhaul and legislation to increase military and domestic spending.

Higher deficits mean less maneuvering room for policymakers when the day of reckoning finally arrives for Social Security and Medicare.