The report from the Social Security and Medicare Boards of Trustees underscores the fragility of the nation’s safety net programs, adding to the pressure on lawmakers to find a bipartisan plan for long-term stability.
“The 2023 Trustees Reports indicate a need for substantial changes to address Social Security’s and Medicare’s financial challenges,” the boards wrote.
“The Trustees recommend that lawmakers address the projected trust fund shortfalls in a timely way in order to phase in necessary changes gradually and give workers and beneficiaries time to adjust their expectations and behavior.”
Once the reserves from Medicare’s Hospital Trust Fund are depleted, it would only be able to cover 89 percent of the expected costs.
According to the trustees, Medicare gained three extra years of solvency compared to 2022, meaning its funding will run out in 2031.
The board cited the
evolving impact of the COVID-19 pandemic as part of this change, and “lower health care utilization through 2032” as one of the largest reasons for this change.
Essentially, more older and sicker individuals died during the COVID-19 outbreak, meaning Medicare beneficiaries are expected to be healthier on average and require less services to be paid for.
Hospital bills represent only a fraction of total Medicare costs, and the report looked at the projected costs for covering doctors’ visits and prescription drugs.
The expected effects of the drug price negotiation provisions included in the Inflation Reduction Act are expected to contribute to substantially lower projected spending on Medicare Part D.
President Biden proposed to extend the lifetime of Medicare’s Hospital Insurance fund into the 2050s as part of his budget rollout earlier this month. The plan included proposals to lower costs for beneficiaries and impose a higher tax rate on high earners.
“Lawmakers have many options for changes that would reduce or eliminate the long-term financing shortfalls,” the trustees wrote in the report. “With each year that lawmakers do not act, the public has less time to prepare for the changes.”
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