That’s when Social Security’s combined trust funds — which help support payments for the elderly, survivors and the disabled — are expected to run out. This is a year later than directors had expected in 2021, thanks to the country’s economy, jobs and incomes recovering from the Covid-19-fueled downturn stronger and faster than expected. Last year.

Solely with respect to the trust fund that covers retirement and survivor benefits, Social Security will only be able to afford scheduled payments until 2034. At that time, the fund’s reserves will be exhausted and payroll taxes will only cover 77% of the benefits due. Some 56 million people received these benefits in 2021.

The Disability Insurance Trust Fund, on the other hand, should have sufficient funds throughout the 75-year projection period. Last year it was predicted to be exhausted by 2057, but administrators have since lowered predicted long-term disability incidence rates. Some 9.2 million people received disability benefits in 2021.

Medicare, which covered nearly 64 million elderly and disabled Americans last year, is in more serious condition.

Its hospital insurance trust fund, known as Medicare Part A, will only be able to pay planned benefits until 2028, two years later than last year, as the number of workers subject to payroll taxes and the average wages should now be higher. At that time, Medicare will only be able to cover 90% of the total benefits.

There is currently no consensus among experts on the lasting impact of the pandemic on compensation program finances. As Medicare faced additional costs to cover Covid-19 patients, that amount was more than offset by reduced utilization as Americans postponed care, an agency official said Thursday. administration to journalists. Directors assume that this will have no net effect on long-term projections.

Yet the cost of Social Security and Medicare is projected to rise faster than the national economy in the mid-2030s, primarily due to the rapidly aging US population. Medicare costs will rise faster than gross domestic product through the late 2070s due to projected increases in health care services provided.

Last year, about 179.3 million workers paid payroll taxes to Social Security and 183.1 million paid payroll taxes to Medicare. Employers and workers each pay a 7.65% levy to fund compensation programs. The Social Security payroll tax rate is applied to income up to $147,000 in 2022, while there is no cap for the Medicare tax. High-income workers pay an additional 0.9% tax on health insurance.

Trust funds also receive income from the taxation of social security benefits.

Among the changes Congress could make to improve the solvency of Social Security would be to increase revenue by a third, cut costs by a quarter, or a combination of the two, said Stephen Goss, chief actuary of the Social Security Administration. panel Thursday.

Raising the retirement age would have less impact because the main problem is demographic: there are not enough workers contributing to the system compared to the number of elderly people, mostly baby boomers, who receive benefits.

As for Medicare, Congress shouldn’t take the program’s slight improvement in solvency as a sign of waiting another two years to fix the problem, said Cori Uccello, senior health researcher at the American Academy of Actuaries.

“If we wait too long, our menu of options shrinks,” she said. “Providers might not be paid in full. And since that never happened, we don’t know what would happen. … It might affect access to care.”

Next year’s adjustments

Reports from administrators and administration officials also gave a first look at Social Security’s cost-of-living adjustment for 2023, as well as Medicare Part B premiums, though officials warned that the numbers could change before final decisions are made in the fall.

Social Security recipients could see a roughly 8% increase in monthly payments next year, due to high inflation, an official said. The adjustment, which was 5.9% for 2022, will be determined by the consumer price index for the months of July, August and September.
Meanwhile, Medicare administrators are planning no premium increases for 2023, after increasing the amount by 14.5% for this year. In fact, the Centers for Medicare and Medicaid Services recently announced that savings from a price reduction and determination of limited coverage for the Alzheimer’s drug Aduhelm could be factored into lower premiums. 2023.

This story has been updated with additional information.