Reports Show Challenging Financial Outlook for Social Security and Medicare
Every year, the Trustees of the Social Security and Medicare Trust Funds release reports to Congress on the current financial condition and projected financial outlook of these programs. This year’s reports, released on April 23, 2012, show that both programs face urgent financial challenges that should be addressed as soon as possible.
Why are Social Security and Medicare facing financial challenges?
Social Security and Medicare are the two largest public benefit programs in the United States and are funded primarily through the collection of payroll taxes. Partly because of demographics and partly because of economic factors, fewer workers are paying into Social Security and Medicare than in the past, resulting in decreasing income from the payroll tax. The strain on the trust funds is also worsening as large numbers of baby boomers hit retirement age and Americans live longer.
Trustees report highlights: Social Security
The Social Security program consists of two parts. Retired workers, their families, and survivors of workers receive monthly benefits under the Old-Age and Survivors Insurance (OASI) program, while disabled workers and their families receive monthly benefits under the Disability Insurance (DI) program. This year’s trustees report shows that:
You can view the Social Security Board of Trustees Report at www.socialsecurity.gov.
Trustees report highlights: Medicare
There are two Medicare trust funds. The Hospital Insurance (HI) Trust Fund pays for inpatient and hospital care (Medicare Part A costs). The Supplementary Medical Insurance (SMI) Trust Fund comprises two separate accounts, one covering Medicare Part B (which pays for physician and outpatient costs) and one covering Medicare Part D (which covers the prescription drug benefit). According to this year’s trustees report:
You can view the Medicare Board of Trustees Report at the actuarial studies page at www.cms.gov. You can also view this report, as well as a combined summary of the Social Security and Medicare trustees reports at www.socialsecurity.gov.
What does the future hold?
Both the Social Security and Medicare trustees reports make it clear that these challenges aren’t going away. Costs are projected to grow substantially in the coming decades. Both reports urge Congress to address the financial challenges in the near future, so that solutions will be less drastic and may be implemented gradually, lessening the impact on the public. As the Social Security Board of Trustees report states, “Both Medicare and Social Security cannot sustain projected long-run program costs under currently scheduled financing, and legislative modifications are necessary to avoid disruptive consequences for beneficiaries and taxpayers.”
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Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2012.