The financial outlook for Social Security and Medicare has worsened, with both programs now expected to reach insolvency earlier than previously projected, according to an annual report released Wednesday by their trustees.
The Medicare hospital insurance trust fund is now forecast to be unable to pay full benefits by 2033, three years sooner than last year’s estimate. Social Security’s trust funds, which support retirement and disability payments, are projected to run short by 2034, one year earlier than previously expected. After that point, Social Security will only be able to pay about 81% of scheduled benefits.
Rising health care costs and recently enacted legislation have contributed to the accelerated depletion timelines. Among the contributing factors is the Social Security Fairness Act, which increased benefits for certain recipients and added financial strain to the trust funds.
Despite last year’s \$29 billion surplus in Medicare’s hospital trust fund, long-term projections remain bleak. The fund is expected to shift into deficit by 2028, with reserves fully depleted five years later. At that point, Medicare could cover just 89% of hospital and post-acute care expenses.
Social Security’s looming shortfall also remains a pressing concern. The trustees’ report indicates that changes are needed to stabilize the program, but political gridlock has repeatedly stalled reform efforts. Proposals to raise revenue or adjust benefit formulas have yet to gain significant traction in Congress.
The financial squeeze comes as Medicare covers more than 68 million Americans and Social Security supports over 69 million, with both numbers expected to rise as the population ages.
Without legislative action, millions of Americans could face reduced benefits within the next decade. While lawmakers from both parties have promised to protect these programs, disagreement over how to fund them continues to push critical decisions further into the future.
source: SSI annual report