Social Security and Medicare annual report warns of coming crisis

Report warns Medicare will become insolvent in 2026

The solvency of the Medicare trust fund, the main U.S. public health insurance program, deteriorated over the last year and could be exhausted by 2026 - two years earlier than previously estimated.

Centers for Medicare and Medicaid Services Administrator Seema Verma on Tuesday urged Congress to examine the Medicare proposals in President Donald Trump's fiscal 2019 budget, saying in a statement that they would bolster the integrity of the program.

However, as now projected, it is highly unlikely that economic growth absent larger reforms could solve the programs' huge budget quagmire.

The Medicare trust fund will be depleted in 2026, the administration said.

The report also stated this year Social Security's total cost is projected to exceed its total income for the first time since 1982, and will remain higher into the future. Lackluster economic growth in previous years, coupled with an aging population, has contributed to the projected shortages for both Social Security and Medicare. After that, the government predicts it will be able to pay 91 percent of promised benefits.

In 16 years, Social Security will have to cut benefits by 21%if lawmakers do nothing to cure the program's long-term funding shortfall.

Those living off of Social Security will not likely be "dancing in the streets" with the anticipated 3% COLA, Johnson said, despite the fact that over the past nine years the COLAs have averaged just 1.2%.

More than 60 million Americans benefit from both programs, which provide a guaranteed income and healthcare for many retirees and the disabled. Financed with payroll taxes collected from workers and employers, Social Security and Medicare account for about 40 percent of government spending, excluding interest on the federal debt. Nor has he endorsed higher taxes to finance the programs, as some Democrats have suggested.

The White House is required by law to tell Congress about how it will ensure Medicare's long-term solvency if official projections show a worsening in the program's long-term financing.

The country's main welfare program for retirees, Social Security, also faces an uncertain future. Medicare spent $710 billion in 2017, according to the report, making it the single biggest purchaser of health services in the U.S. The trustees include Treasury Secretary Steven Mnuchin and Health and Human Services Secretary Alex Azar.

"The HI trust fund does not meet either the trustees' test of short-range financial adequacy or their test of long-range close actuarial balance", the report stated.

Medicare's hospital insurance fund, meanwhile, will become insolvent by 2026, or three years sooner than projected last year. "The programs remain secure", he said.

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