Rumors of Medicare and Social Security insolvency (running out of money) are making their way through news headlines again this month. If you receive Medicare and Social Security benefits, this could leave you feeling worried and financially insecure–but don’t panic just yet. Medicare and Social Security aren’t going anywhere.
In June 2018, the Medicare trustees announced that the Medicare hospital insurance trust fund will run out of money by 2026, three years earlier than reported in 2017. This is due to factors like higher spending, higher payments to Medicare Advantage plans, and a growing number of people aging into the system every year.
However, Medicare operates as a self-sustaining financial model. This means funds are continuously withdrawn from payroll taxes of working Americans in order to support the healthcare program. It’s possible that some Medicare costs and Medicare payroll taxes could increase in order to balance the budget, but Medicare insolvency should not concern you.
Social Security insolvency
According to the most recent report from the Social Security Board of Trustees, Social Security is set to run out of assets by 2034. However, as Social Security currently works, it can’t go bankrupt. Like Medicare, the main source of funding for the program is payroll taxes collected from workers and their employers. So as long as Americans keep working, the government will collect the payroll tax and use it to pay Social Security benefits.
Although, unless Social Security taxes are increased, it’s possible that the government will reduce Social Security payments up to 23 percent in order to provide payments for existing and new beneficiaries.
What are politicians doing about Medicare insolvency?
The simplest solution to save Medicare would be to raise payroll taxes. However, this idea is unpopular with the public. Another option is to use general revenue to support the program, although this would raise the national debt even higher.
The most drastic solution would be a measure to completely restructure the American healthcare system by way of Medicare for All. As the 2020 presidential race ramps up, more and more democratic candidates are throwing their support behind the increasingly popular movement.
If passed, the Medicare for All bill could:
- Provide healthcare to every American within four years,
- Eliminate copays, deductibles, and premiums,
- Preserve large portions of Social Security checks that are dedicated to healthcare costs, and
- Expand Medicare coverage to include benefits like dental, hearing, and vision care.
House Democrats continue to hold hearings about Medicare for All and release new iterations of the bill frequently.
How are they reacting to Social Security insolvency?
One proposal to save Social Security from going bankrupt is the Social Security 2100 Act, proposed by Rep. John Larson (D-CT).
If passed, the Social Security 2100 Act could:
- Increase the minimum benefits for those who worked low-paying jobs while contributing to the Social Security fund,
- Provide a more accurate measure for the annual cost-of-living adjustment (COLA) to ensure beneficiaries will not see their benefits gradually erode due to inflation, and
- Ensure benefits are paid on time to those who are eligible to receive them, including Gold Star families, children of deceased or disabled workers, seniors, and more.
If you’re worried about Medicare and Social Security running out of money, contact your members of Congress and ask what they’re doing to protect Medicare and Social Security funding.