(PCC)It’s not ‘time travel’; the clock is just running faster, but the frightening news is, America is fighting against the clock and losing. The long-feared insolvency of Medicare and Social Security just got a little closer.
Brace yourself. The latest annual report released Wednesday by the programs’ trustees indicates that the financial lifelines supporting tens of millions of Americans are heading toward depletion sooner than previously projected and faster than many lawmakers and the public expected.
The Medicare Hospital Insurance Trust Fund, which finances inpatient hospital services for more than 68 million older and disabled Americans, is now projected to run dry by 2033. That’s three years earlier than last year’s estimate of 2036. At that point, the fund would only be able to cover 89% of costs for hospital stays, hospice, and related care.
The projections are not accounting for the unseen event, which may speed up the clock. Unknown viruses not much different than COVID-19, wars, massive influxes of migrants, and so many other things that will have a direct hit on Medicare and Social Security.
Social Security’s trust funds, covering both old-age and disability benefits, are now projected to be unable to pay full benefits by 2034, one year earlier than projected in 2024. After that date, retirees and disabled Americans will face a significant shortfall, with the program able to pay just 81% of scheduled benefits.
What’s Accelerating the Crisis?
Two major developments are driving the accelerated depletion:
- Rising Health Care Costs. Medicare’s outlays surged in 2024, as hospital and post-acute care expenses exceeded forecasts. Although payroll taxes brought in a surplus of $29 billion, that positive trend is expected to reverse by 2027. With costs outpacing earnings growth, the fund will shift into deficits, accelerating the drawdown of reserves.
- New Legislation: The Social Security Fairness Act, officially H.R. 82, was signed into law by President Joe Biden on January 5, 2025. This act eliminates the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO), which reduced Social Security benefits for public sector employees who also received pensions. While popular among affected groups, the repeal significantly raised benefit payouts and hastened the program’s financial shortfall.
Despite growing warnings from the trustees, political action remains elusive. President Donald Trump and many Republican lawmakers have pledged not to cut Social Security or Medicare, maintaining a stance of protection for current and future beneficiaries, which is a comfort to the growing senior segment of society.
Frank Bisignano, recently appointed Commissioner of the Social Security Administration, acknowledged the urgency, saying the programs’ solvency “remains a top priority” for the Trump administration. Yet real solutions require legislative action, something Congress has consistently deferred.
Reform Proposals in the Pipeline
Congress has put forth several proposals to tackle the impending crisis.
- One proposal is to raise the payroll tax cap, which currently limits Social Security taxes on wages above $168,600.
- The proposal to gradually raise the retirement age still faces political opposition.
- Implementing this would require reducing benefits for retirees with higher incomes.
- Introducing new taxes on investment income or other sources to supplement payroll revenues.
The latest report confirms what policy experts have warned for years: Medicare and Social Security are on an unsustainable path, and the reckoning is approaching faster than expected. Without swift and substantial legislative intervention, millions of Americans may soon face reduced benefits, and the country’s safety net may deteriorate at a time when the population most needs it.
With the use of ‘fair tariffs, supply-side economics, job creation through oil drilling and steel production, and the harvesting of the vast mineral wealth in Ukraine and in Southwest America, the tide could be turning and in the right direction.
Final Word: Blind pundits only see rising taxes or cutting benefits but fail to consider new sources of revenue to offset future shortfalls, but where is a headlines in that?
