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By RICARDO ALONSO-ZALDIVAR and MARTIN CRUTSINGER, Associated Press
WASHINGTON (AP) – The brutal shock of the coronavirus recession brought Social Security one year closer to insolvency but left the Medicare exhaustion date unchanged, the government reported on Tuesday in a counterintuitive assessment that reinforces uncertainty around the country’s core retirement programs.
New projections in the annual reports of Social Security and Medicare administrators indicate that the huge Social Security trust fund will not be able to pay full benefits in 2034 instead of the due date. Last year’s estimated depletion of 2035. For the first time in 39 years, the cost of delivering benefits will exceed total program income from payroll tax collection and interest during that year. From there, Social Security will use its investments to pay for all benefits.
Medicare’s hospital care trust fund exhaust date remained unchanged from last year, estimated at 2026.
In the 1980s, financial warnings regarding Social Security prompted President Ronald Reagan and lawmakers from both parties in Congress to collaborate on a long-term solvency plan, but such action is unlikely in the bitter political climate of ‘today. Democrats who control the White House and Congress have said they will protect both programs.
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“The Biden-Harris administration is committed to protecting these programs and to ensuring that they continue to provide economic security and health care to elderly Americans,” Treasury Secretary Janet Yellen said in a statement. communicated.
The latest estimates reflected the push and pull of many factors resulting from the pandemic, and the full impact may take years to resolve. The deep but relatively short recession reduced payroll tax revenue. But the death toll from COVID-19, concentrated among the elderly, has reduced future social security benefit payments. Hospitals have been stressed by the influx of COVID patients, but Medicare hasn’t had to pay as many for knee surgeries, colonoscopies and other more common procedures. Birth and immigration rates, which tend to support both programs, have both declined.
For Social Security, the loss of tax revenue on wages exceeded any savings on what the program would have paid to people whose lives were lost in the pandemic. The report notes that jobs, incomes, interest rates and economic growth fell in the second quarter of 2020 after the pandemic hit the United States.
“The finances of both programs have been significantly affected by the pandemic and the 2020 recession,†the administrators said. But “given the unprecedented level of uncertainty,” there was no consensus on the long-term effects of the pandemic. An imminent question for Medicare: Will the beneficiary population who survived the pandemic be healthier overall, or will a high number suffer from new conditions like the long COVID?
Social Security provides benefits to more than 65 million Americans, mostly retirees but also people with disabilities and survivors of deceased workers. Medicare covers over 60 million elderly and disabled people. Together, the two programs represent over 40% of the federal budget and act as stabilizers not only for families, but also for the national economy.
While the long-term projections are sobering, in the short term there was good news for Social Security recipients.
Government economics experts who prepared the Social Security report estimated that recent increases in inflation mean the cost of living adjustment for 2022 will approach 6%, a huge jump from 1.3%. % COLA granted for this year.
Part of this can lead to higher health insurance costs. The Medicare “Part B” premium for outpatient coverage was expected to increase by $ 10 per month in 2022, to reach $ 158.50 according to the report’s interim assumptions. The official issue will not be published until later this year.
Social Security and Medicare remain under intense financial pressure with the retirement of millions of baby boomers, who are living longer than previous generations.
When the Social Security trust fund runs out, the government will be able to pay 78 percent of planned benefits, according to the report.
Because a reduction in benefits of this magnitude would spark a political outcry, it is likely that a future Congress will find ways to recoup lost benefits, either by increasing payroll taxes paid by current workers or by increasing government borrowing. government to cover the deficit.
It’s unclear how Tuesday’s Medicare report will affect the debate in Capitol Hill over whether to allow the program to negotiate prescription drug prices, and then use the planned savings to provide new Medicare coverage for dental services. visual and auditory. Republicans argued that any savings should be used to shore up the underlying program, not to expand the benefits.
The Medicare report avoided making projections on the new Alzheimer’s disease drug, Aduhelm, which has a list price of $ 55,000. Most of the 6 million Americans with Alzheimer’s disease are covered by the program, although not all are candidates for treatment. The economics experts who prepared the reports said it was too early to estimate the drug’s impact on Medicare because the program has not officially decided how to cover it.
The directors’ reports, which have been delayed for months, represent the government’s effort to assess the impact of last year’s pandemic and recession on Social Security and Medicare.
The US economy lost 22.4 million jobs in March and April 2020 as the pandemic forced businesses to shut down or cut hours and the economy entered recession.
But the recession was brief, and hiring rebounded as economic growth resumed. Employers have restored 16.7 million jobs since April 2020, but the gain still leaves the workforce 5.7 million jobs below what it was before the pandemic.
The administrators of social security and health insurance include the secretaries of the treasury, health and social services and labor, as well as the commissioner of social security. They are supposed to be joined by two “public trustees”, knowledgeable private citizens who are the eyes and ears of taxpayers and beneficiaries. But these positions have been vacant since before the end of the Obama administration. And this year, there is also no Social Security Commissioner, as President Joe Biden sacked Andrew Saul, a replacement for the Trump administration.
Copyright 2021 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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