Center on Budget & Policy Priorities Issues Statement on Social Security, Medicare
"The financial outlook for
"The trustees project that the HI trust fund will be depleted three years earlier than previously thought -- in 2026. The 75-year HI shortfall has increased from 0.64 percent to 0.82 percent of taxable payroll, or 0.18 percentage points less favorable than estimated last year. Much of this deterioration is due to policy actions by the Administration and the
"
"Although both
"The aging of the population is the major driver of the projected growth in
"
"There is some room to trim
Medicare
"Much of the deterioration in the Medicare HI trust fund's outlook is due to actions by the Administration and the
* Enacting the 2017 tax law, which reduces income taxes on
* Repealing the tax penalty for failing to get health insurance (also part of the tax law), which will increase the number of uninsured and increase Medicare payments for uncompensated care;
* Repealing the
* Failing to address higher Medicare Advantage (MA) payments due to insurance company assessments of their beneficiaries that make them appear less healthy than they are.
"In fact, legislative changes and higher MA payments account for the entire increase in HI's 75-year shortfall, along with a major part of the change in the HI depletion date.
"The change in the HI projections, however, should be kept in perspective. Since 1970, changes in the law, the economy, and other factors have brought the projected year of HI depletion as close as two years away or pushed it as far as 28 years into the future. The latest projection falls within that spectrum. Trustees' reports have been projecting impending insolvency for over four decades, but Medicare has always paid the benefits owed because Presidents and Congresses have taken steps to keep spending and resources in balance in the near term. In contrast to
"Moreover, the Affordable Care Act (ACA), along with other factors, has significantly improved Medicare's financial outlook compared to what it was just a few years ago. The HI trust fund is now projected to remain solvent eight years longer than before the ACA was enacted, and the HI program's projected 75-year shortfall of 0.82 percent of taxable payroll is much less than the 3.88 percent of payroll that the trustees estimated before health reform. This means that policymakers could close the entire projected funding gap by raising the Medicare payroll tax -- now 1.45 percent each for employers and employees -- to about 1.85 percent, or by enacting a mix of program cuts and tax increases.
"The trustees' 2034 depletion date is for the combined
"The number of DI applicants and beneficiaries has declined over the past several years, as demographic and economic pressures on the program have eased. Analysts largely anticipated this trend, since most of the recent growth in DI enrollment was due to demographic factors like the aging of the baby-boom generation, but the slowdown in enrollment has proved even greater than expected. As the boomers reach retirement, the number of workers receiving DI benefits has declined for four straight years. Likewise, DI applications, which spiked during the aftermath of the Great Recession, have fallen every year since 2010. The trustees project that the share of insured Americans receiving DI will remain relatively stable in coming decades, and costs will stay steady at about 0.75 percent of GDP.
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"The trustees caution that their projections are uncertain. For example, they estimate a 95 percent chance that
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