Social Security benefits will be exhausted by 2033—unchanged from last year's projections—while Medicare will only be able to pay out its obligations until 2026, two years longer than last year's projection, according to the Social Security and Medicare Trustee reports, released Friday.
While Social Security and Medicare are meeting their commitments today, and will continue to do so in the years ahead, "these programs face long-term challenges," said Treasury Secretary Jack Lew during a Friday press briefing. In fact, Lew said, the projections in this year's report for Social Security are "essentially unchanged" from last year, while those for Medicare "have improved modestly."
After 2033, the Trustees expect, the income from the dedicated payroll tax will be sufficient to finance about three-quarters of scheduled benefits through 2087.
Lew went on to note that the Medicare report demonstrates "the importance of the Affordable Care Act, which has strengthened Medicare's finances by reining in health care costs."
The health care law has also helped extend the life of the Medicare Hospital Insurance Trust Fund, Lew said. Overall, he said, "Medicare's Hospital Insurance Trust Fund will have resources sufficient to cover full benefits until 2026, two years longer than what was projected in last year's report."
The report notes that Part B of Supplementary Medical Insurance (SMI), which pays doctors' bills and other outpatient expenses, and Part D, which provides access to prescription drug coverage, are both projected to remain "adequately financed into the indefinite future because current law automatically provides financing each year to meet the next year's expected costs."
However, the report notes that the aging population and rising health care costs cause SMI projected costs to grow steadily from 2% of GDP in 2012 to approximately 3.3% of GDP in 2035, and then more slowly to 4% of GDP by 2087. "Roughly three-quarters of these costs will be financed from general revenues and about one-quarter from premiums paid by beneficiaries," the report states.
