The financial health of Social Security and Medicare, two of the nation’s most crucial safety-net programs, improved slightly in 2021 on the back of a strong economic recovery during the coronavirus pandemic, according to two new government reports.
However, both programs continue to face major longer-term shortfalls that could reduce retirement benefits for millions of retirees and limit payments to hospitals that provide care to Medicare patients if Congress doesn’t act to strengthen them.
Annual government reports released on Thursday by trustees of the government’s Social Security and Medicare programs said the economic recovery from the 2020 recession was “stronger and faster” than assumed in last year’s projections.
But the trustees cautioned that the economic outlook had become more uncertain since mid-February, when the actuaries made their assumptions for the current reports. For now, they are also assuming that the pandemic will not affect the long-term solvency of the programs.
Tens of millions of aging Americans, including 47 million retired workers, rely on Social Security and Medicare to supplement their income and health care expenses. However, both programs — which are funded by payroll and other taxes — face shortfalls in the future, and legislators have taken little action to address the issue.
The Social Security Old-Age and Survivors Insurance Trust Fund, which pays retiree benefits, will be depleted in 2034, one year later than previously projected. At that time, the fund’s reserves will run down, which means incoming tax revenue will be enough to cover only 77 percent of scheduled benefits.
That is largely a result of demographic shifts. More baby boomers are collecting Social Security payments while a declining birthrate is producing fewer workers to pay taxes.
“Lawmakers have many policy options that would reduce or eliminate the long-term financing shortfalls in Social Security and Medicare,” the trustees said in summary…
Tara Siegel Bernard and Margot Sanger-Katz
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