A bipartisan retread needed to ensure solvency of Social Security, Medicare
On June 5, 2018, the Social Security and Medicare trustees released their annual report to Congress providing a snapshot of the long-term financial security of Medicare and Social Security – two of the nation’s large entitlement programs. It was not good news for lawmakers, nor for the 67 million people who receive retirement, or disability benefits from Social Security and for 58.4 million on Medicare.
The 2018 Social Security Trustee’s Report to Congress, prepared by non-political actuaries and economists, warned that the combined asset reserves of the Old-Age and Survivors Insurance and Disability Insurance (OASDI) Trust Funds are projected to become depleted in late 2034, as compared to last year’s estimate of early 2035, with 77 percent of benefits payable at that time. The DI Trust Fund will become depleted in 2032, extended from last year’s estimate of 2028, with 96 percent of benefits still payable.
As to Medicare, the Medicare Trustee’s Report predicted that the Medicare hospital program will not be able to pay full benefits in 2026. The Trustees, for a second year in a row, issued a Medicare funding warning due to general revenue funding expected to exceed 45 percent of total Medicare outlays within seven years, triggering a requirement for the President to submit to Congress in 2019 legislation to address warning to be considered on an expedited basis.
Released report triggers discussion on Social Security, Medicare solvency
Media across the country reported the Social Security and Medicare trustees warning about long-term financial issues facing Social Security and Medicare. Just read the New York Time’s headline: “Medicare’s Trust Fund is Set to Run Out in 8 Years. Social Security.” Here’s CNN’s take: “Social Security Must Reduce Benefits in 2034 if Reforms Aren’t Made.” Or take a look at the New York Daily News’ attention-grabbing headline, “Social Security and Medicare Head Toward the Skids.”
With the release of the 2018 Annual Report, the powerful House Ways and Means Committee Chairman Kevin Brady (R-Texas), called for ensuring the financial solvency of Social Security and Medicare. “The time is now to come together in a bipartisan manner to address these real challenges,” he said.
Health Subcommittee Chairman Peter Roskam (R-Illinois) also gave his two cents.
“The Medicare Trustees paint an even bleaker picture than last year, pointing to the need for commonsense reforms to ensure this critical safety net program continues to deliver health care to our nation’s seniors and individuals with disabilities,” said Roskam. “The solutions are not elusive as was demonstrated in part earlier this year when Congress acted on key Medicare reforms contained in the Bipartisan Budget Act of 2018 to improve access and quality in the Medicare program, but more work remains to be done. This warning from the Trustees is a sobering marker of the work ahead to ensure this program is around for our children and grandchildren,” he said.
Looking at the glass half full, not half empty
Even with the bleak findings, the National Committee to Preserve Social Security and Medicare and other aging advocacy groups have their take.
Max Richtman, president and CEO of the National Committee to Preserve Social Security and Medicare (NCPSSM), notes the released Annual Report confirms that the Social Security’s trust fund is “still very much intact, with $2.89 trillion in assets – or $44 billion more than last year.”
There is still time for Social Security fixes, says Richtman. “The Trustees have confirmed that Congress has ample time (16 years) to enact modest and manageable changes to Social Security to address the fiscal shortfall. Most Americans agree that raising the payroll wage cap is the easiest and most effective way to strengthen Social Security’s finances, negating the need for harmful benefit cuts like means testing or raising the retirement age,” he said.
According to NCPSSM, since 2013 there has been a growing number of aging groups (along with Democratic lawmakers) calling to lift the wage cap and increase Social Security benefits. The Washington, D.C.-based NCPSSM’s Boost Social Security Now campaign endorses legislation in Congress introduced by Senator Bernie Sanders (I-Vermont), Rep. John Larson (D-Conn.) and others, which keeps the Social Security Trust Fund solvent well into this century, while boosting benefits and cost-of-living adjustments (COLAs).
On Medicare, the Trustees Report shows that the Part A Trust Fund will be able to pay full benefits until 2026, at which point payroll taxes are estimated to be sufficient to cover 91 percent of benefits – if nothing is done to bolster the system’s finances, says Richtman, noting that NCPSSM supports several measures to keep Medicare financially sound, including a genuine push to allow the program to negotiate drug prices with pharmaceutical companies.
NCPSSM calls for restoring rebates the pharmaceutical companies formerly paid the federal government for drugs prescribed to “dual-eligibles” (those who qualify for both Medicare and Medicaid), in addition to innovation in the delivery of care and in the way, care is paid for – to keep Medicare fiscally sound for future beneficiaries.
AARP CEO Jo Ann Jenkins urges Congress to work “in a bipartisan manner to strengthen these vital social insurance programs to ensure they can meet their benefit promises for current and future generations.” She agrees with Richtman about the need to rein in rising Medicare pharmaceutical costs. “In particular, we need to take further steps to lower the cost of health care, especially the ever-rising price of prescription drugs. No good reason exists for Americans to continue paying the highest brand name drug prices in the world. High-priced drugs hurt Americans of all ages, and seniors, who on average take 4.5 medications a month, are particularly vulnerable,” she said.
Nancy Altman, president of Social Security Works and the chair of the Strengthen Social Security Coalition, calls for strengthening and expanding Social Security not cutting it.
The Social Security program is “fully affordable,” says Altman, noting that “poll after poll shows that the American people overwhelmingly support expanding the program’s benefits.”
Politicians are listening, too, she said.
“Social Security is a solution to our looming retirement income crisis, the increasing economic squeeze on middle-class families, and the perilous and growing income and wealth inequality. In light of these challenges and Social Security’s important role in addressing them, the right question is not how we can afford to expand Social Security, but, rather, how can we afford not to expand it,” says Altman.
It’s time for a bipartisan fix
As the mid-term election approaches, it’s time for the Republican congressional leaders to work with their Democratic colleagues to craft bipartisan legislation to make permanent long-term fixes to Social Security and Medicare to ensure these program’s fiscal solvency for future generations.
It is projected roughly 10,000 Baby Boomers will turn 65 today, and about 10,000 more will cross that threshold every day for the next 19 years. By the time the last of this generation approaches retirement age in 2029, 18 percent of the U.S. will be at least that age, reports the Pew Research Center.
With the graying of American, the hand writing is on the wall. With the release of this year’s report by the Social Security and Medicare trustees, Congress must decisively act now to ensure that Social Security and Medicare are strengthened, expanded and benefits not cut. As Chairman Brady, of the House Ways and Means Committee, says, it is now time to address these real challenges. Hopefully, his House colleagues and lawmakers in the upper chamber will agree.