Medicare Faces Insolvency in 2026, Three Years Earlier than Last Year's Projection

Social Security must reduce benefits in 2034 if reforms aren’t made

Medicare and Social Security are running out of money more quickly than expected, officials said Tuesday.

The Social Security system is in nearly the same shape as past year for its retirement benefits and in a better position for its disability benefits, the program's trustees reported Tuesday.

The combined Social Security trust funds are slated to run dry in 2034, and that will force benefits to be cut more than 20 percent.

Together, the two programs have been credited with dramatically reducing poverty among older people and extending life expectancy for Americans.

At the times the combined reserves are depleted the continuing income of the trust funds would be sufficient to pay 79 percent of scheduled benefits.

A new report is heightening concerns about the financial future of Medicare.

Mnuchin said in a statement that there's time to fix the problems.

Medicare's problems are widely seen as more hard to solve. Mnuchin is one of the trustees of Social Security and Medicare, a group that includes three Trump Cabinet officers and that released the annual report.

Meanwhile, Medicare Part B, which helps seniors pay for doctor's bills and outpatient expenses, is funded by a combination of premium payments and money from general federal revenue.

The trustees estimate a 2.4 percent cost of living increase for beneficiaries in December, up from 2 percent a year ago. The public trustee posts are now unfilled.

The Congressional Budget Office said in April that federal deficits and debt would soar in the coming decade, after passage of the tax overhaul and legislation to increase military and domestic spending. The White House said the cuts would offset the initial drop in government revenue by spurring greater economic growth.

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

In principle, the supposed to be paying forward its Social Security and Medicare obligations by building up trust funds to cover future costs.

"Taking action sooner rather than later will permit 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 trustees concluded.

House Speaker Paul Ryan, R-Wis., has always been an advocate for overhauling the programs, introducing a voucher-like system for Medicare and calling for partially privatizing Social Security. In any case, Republicans may have damaged their credibility on budget issues by voting to increase government spending and cut taxes. Their formula is likely to involve tax increases to help keep the programs solvent.

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