A(nother) wake-up call
Each spring, the Trustees of Social Security and Medicare publish an annual report on the state of those programs.
News organizations duly answer what they seem to think is the main question the public asks: How long will the programs remain “solvent?” That is, when will there be a real risk that either Medicare or Social Security run out of sufficient funds to cover current costs?
This question is pertinent not only to older adults who are currently collecting Social Security or relying on Medicare for their health insurance, but also to the rest of the taxpaying public on whose shoulders additional costs ultimately rest.
This year’s report was deemed to offer “good news.” Social Security, overall, is believed to have sufficient funds to pay all scheduled benefits through 2035 (“one year later than reported last year!”), after which it could pay only 80% of benefits going forward.
Medicare Part A/hospital insurance is in worse shape. Its hospital and inpatient doctor coverage is secure only through 2028. For the sixth consecutive year, the Trustees have issued a warning to Congress that “excess general revenue” (that is, more tax dollars than Congress wanted to allocate) will be required to maintain that portion of Medicare.
Both of those statements should be ringing alarm bells and generating action in Congress. Unless steps are taken to address these, taxpayers are going to have to pay more, and Social Security and Medicare beneficiaries are going to get less.
I want to add another concern. I think we should also be asking about the status of Medicare Part B — the part of Medicare that covers outpatient doctor visits, preventive care and mental health services.
By design, the payroll taxes all Americans pay for Medicare, plus the premiums paid by the 64 million of us covered by Medicare, only cover about half that program’s cost. General revenues — that is, our tax dollars — cover the balance.
I suppose it’s “good news” that Part B is not in danger of insolvency, but that’s only because we can always raise taxes to cover the shortfall.
FYI, last year, the contribution of tax dollars to Medicare Part B was approximately $428 billion, and the Trustees predict that, “due to the rapid growth of [Medicare Part B’s] cost” each year, it will place “steadily increasing demands on both taxpayers and beneficiaries.”
Left unaddressed, these growing costs could soon start to undermine other federal spending priorities, not to mention our personal finances.
Turning back to Social Security, it’s important to understand that this program also now relies on taxpayer-funded contributions.
Social Security was designed to be a pay-as-you-go program, where contributions from the paychecks of all American workers (matched by their employers) would cover payouts to current retirees. From here comes the belief that we all have “earned” our Social Security.
The reality, however, is somewhat different. First, back in the early years of Social Security, there were about 42 workers paying into the system for every retiree. Today there are only 2.7. Furthermore, Americans are generally living longer, while the birth rate has dropped.
For all these reasons, the program stopped being pay-as-you-go back in 2016, and the amount of general revenues required to maintain it grows every year.
In 2021, the Trustees report that taxpayers contributed $126 billion to Social Security, about 11% of total costs. That is also expected to rise over time.
So where does all this leave us? For years now, the Trustees’ report, and related reports from organizations concerned about older adults and federal deficits, have urged Congress to take steps to put Social Security and Medicare on more solid financial footing.
This year’s “message to the public,” released with the Trustees’ report, concludes (as it generally has for a number of years now) with this:
“Lawmakers have many policy options that would reduce or eliminate the long-term financing shortfalls in Social Security and Medicare. Taking action sooner rather than later will allow consideration of a broader range of solutions and provide more time to phase in changes so that the public has adequate time to prepare.”
The problem isn’t that we don’t have any solutions. The problem is that our congressional representatives aren’t willing to take the steps to implement them.
This is endemic to Congress, where any action would inevitably step on the toes of some constituents, costing the representatives votes here and now, while the shortfalls in benefits will only cause pain down the road — presumably during the tenure of a future congressperson.
Another problem is that the slots for two “public Trustees” — who are appointed by the president and intended to represent the people, rather than the government — have not been filled since 2015. The absence of these trustees, who often serve as watchdogs for the public, dampens the pressure on both Congress and the president to do something.
My advice: talk to your elected representatives (and preferred candidates) and let them know you want to see action on Social Security and Medicare, and that you won’t vote them out of office if they take responsible steps to fix these important programs.
The power is in your hands. Don’t forget to vote!