The rumor mill is ablaze and many people are asking whether or not Social Security and Medicare are really in as much trouble as people are predicting. We all knew that the Social Security and Medicare programs were in desperate need of reform, but are they really losing funds faster than anticipated and are the benefits that recipients are currently receiving really at stake? While Social Security checks will not be stopping anytime soon, the outlook is definitely concerning.
The bad economy has had an effect on almost everyone and everything, and that includes the finances of the Social Security and Medicare programs. The trust funds have been depleting rapidly and, yes, the programs have been losing money faster than anyone had anticipated. Unfortunately, this means changes will be coming to the Social Security benefit programs, which fund disability benefits recipients. The question is, what kinds of changes and how soon will they be made?
Just how soon will Social Security run out of money? The Medicare fund is expected to run out of funds in 2024. That is five year's earlier than the estimate that was given to us last year. The Social Security trust funds are expected to be depleted in 2036 – one year earlier than last year's estimate.
Why are the looming dates of fund depletion moving forward at such alarming rates? Part of the reason is due to retiring Baby Boomers, who are increasing the number of Social Security recipients, both those receiving retirement and Social Security Disability benefits. Another factor that plays into the issue are the tax receipts received by the SSA, which have been much weaker than expected. This is largely due to high unemployment rates and fewer workers paying into the system.
What Happens When the Funds Are Depleted?
The question that many people are asking is, what happens to the program once the Social Security trust funds have been depleted? Once the trust funds are gone, both programs must rely on payroll taxes alone to pay out benefits. These payroll takes will only be able to cover partial benefits for Social Security recipients.
We all know the Social Security program is in trouble. Recipients have not received a cost-of-living increase in the past two years. Next year's increase is projected to be only 0.7 percent, which won't even cover the increase in the Medicaid Part B premiums that most beneficiaries have to pay.
There is no doubt that changes must be made in order to keep the Social Security and Medicare programs viable. Unfortunately, it may be hard to do that without chipping away at the benefits that Social Security recipients so desperately need.
Congress is currently thinking of ways to address the current situation and the looming crisis. While they are trying to avoid making changes to Social Security benefits, changes to Medicare benefits are most definitely in the works.
What's the Solution?
As of right now, nothing has been written in stone. Benefit cuts may be seen down the road if the Social Security Administration does not decide to raise payroll taxes to increase the flow of income into the Social Security program. One thing is certain, and that is the fact that action must indeed be taken to make changes or the entire system may face serious troubles in the near future.