Social Security and Medicare finances bolstered by growing economy
The financial outlook for Social Security and Medicare improved last year, thanks largely to a rapid economic recovery that drove tax revenues higher.
Driving the news: The trustees of the programs released their annual report on their financial stability Thursday. They projected that it will take longer for the trust funds supporting the programs to run out of money than previously estimated.
- That said, the programs remain on unsustainable long-term footing.
The details: The trust fund for Social Security's retirement and survivor benefits is now projected to run out of money in 2034, the trustees projected, a year later than the previous estimate.
- Once that fund runs out of money, tax revenue the government collects would only support 77% of Social Security benefits, so Congress would face the choice of cutting benefits, raising taxes or both.
- The Social Security disability insurance trust fund is now projected to remain solvent for the next 75 years, not to run out of money in 2057.
Medicare Part A, which pays for older Americans' hospital coverage, is on track to empty its trust fund in 2028, two years later than previously projected. Tax revenues would pay for 90% of benefits owed.
- Moreover, deaths from COVID reduced Medicare costs by 2.9% in 2021, the trustees found. That's because those who died of the disease previously had, on average, higher ongoing medical costs than those who survived the pandemic.
What they're saying: "Economic recovery from the 2020 recession has been stronger and faster than assumed in last year’s reports, with positive effects on the projected actuarial status of the trust funds in these reports," the trustees wrote.
- The four trustees of the programs are the secretaries of the Treasury, Health and Human Services and Labor as well as the Social Security commissioner.
The bottom line: The finances of America's old-age programs remain precarious, but a little less so than was the case before the surge in employment and wages of the last year.