So this is a good news, bad news, more bad news, and really bad news situation. The good news is that the financial stability (or lack thereof) of medicare and social security haven’t changed much since last year. I’m afraid the good news stops there.
The bad news is that Medicare Part A (hospital insurance) will go belly-up in 2024. The more bad news is that Social Security won’t be able to meet its obligations beginning in 2033 (three years earlier than last year’s projections). And the really bad news? The projections make certain assumptions that not even the trustees who run Medicare and Social Security believe to be realistic.
- Medicare costs will grow substantially from approximately 3.7 percent of GDP in 2011 to 5.7 percent of GDP by 2035, and will increase gradually thereafter to about 6.7 percent of GDP by 2086.
- The Trustees project that the HI Trust Fund will pay out more in hospital benefits and other expenditures than it receives in income in all future years, as it has since 2008.
- The projected date of HI Trust Fund exhaustion is 2024, the same date projected in last year’s report, at which time dedicated revenues would be sufficient to pay 87 percent of HI costs.
- Social Security’s expenditures exceeded non-interest income in 2010 and 2011, the first such occurrences since 1983
- After 2020, Treasury will redeem trust fund assets in amounts that exceed interest earnings until exhaustion of trust fund reserves in 2033, three years earlier than projected last year.
- Thereafter, tax income would be sufficient to pay only about three-quarters of scheduled benefits through 2086.
What does it all mean?
Here was the conclusion reached by the Trustees: “Lawmakers should address the financial challenges facing Social Security and Medicare as soon as possible. Taking action sooner rather than later will leave more options and more time available to phase in changes so that the public has adequate time to prepare.”
Perhaps lawmakers can stop talking about gimmicks like the Buffett Tax, and instead start addressing our country’s real fiscal problems.
Published or updated April 23, 2012.