Republican and Democratic leaders have both vowed to leave Medicare and Social Security alone as the debt ceiling fight rears up.
But will that really save the two nation’s two most important entitlement programs?
Currently, the trust funds of both programs face shortfalls as the number of retired Americans have vastly outpaced the programs’ dedicated tax revenue to fund its promised benefits — threatening the future of each program. Doing nothing could ensure its downfall.
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What is the status of Social Security, Medicare?
Social Security is projected to be insolvent in about a decade. Without any legislative action, benefits would automatically be cut by 23% on average by 2033, according to the Congressional Budget Office’s December 2022 report on the program.
Intervention to rescue the program has happened before. Lawmakers previously tinkered with the program to offset insolvency by raising the Social Security age from 65 to 67 for individuals born in 1960 and later.
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While Medicare’s Hospital Insurance program trust fund reserves are projected to be depleted by 2028, the incoming payroll taxes and other revenue will be sufficient to pay for 90% of Medicare hospital insurance costs that year, according to a 2022 report.
However, the program is still set to face more severe shortfalls, which could shrink the amount of coverage beneficiaries receive.
In an effort to reform Medicare, then-House budget committee chairman Paul Ryan in 2011 proposed converting Medicare to a premium-support voucher system from its guarantee of coverage. The proposal, which critics say would have burdened beneficiaries with a substantial amount of the program’s costs, never passed Congress.
Raising the retirement age, expanding the payroll tax: what are the options?
The foreboding forecast has not been a mystery. For years, budget experts and fiscal analysts have discussed how to address the projected shortfalls of both entitlement programs. A wide breadth of individuals have proposed policies to address the expected shortfalls for both programs, but lawmakers have yet to agree on a plan to follow.
Among some of the proposals for Social Security, according to the nonpartisan Committee for a Responsible Federal Budgetare:
Slowing the benefit growth for some earners.
Raising the retirement age from 67 (for those born in 1960 or later) to 68 or 70.
Reduce the percentage of initial benefits.
Increase the rate of payroll taxes, a primary source of Social Security funding.
Increase the amount of wages subject to be taxed for the program. In 2023, only the first $160,200 of someone’s income is subject to payroll taxes.
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Proposals to prevent shortfalls for Medicare, according to the Center on Budget and Policy Prioritiesincludes:
Ending the program’s “over-payments” to pharmaceutical companies for prescriptions for low-income individuals.
Increasing funds to prevent and detect fraudulent and wasteful spending
Increase the program’s payroll tax rates and expand taxes on those currently excluded.
As the number of beneficiaries grow, both programs have to find ways to either increase revenue or find ways to decrease costs to avoid any such shortfalls, gaps in coverage and ensure sustainability.
What are Republicans, Democrats saying?
Following the very public battle President Joe Biden and Republicans had over the future of Social Security and Medicare, party leaders on both sides of the aisle have vowed not to touch the two entitlement programs — especially as the parties face mounting pressure to reach a deal on the debt ceiling.
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But, beyond promises not to touch the programs, leaders have yet to say how to address the programs’ challenging futures.
During his presidential campaign, Biden ran on protecting and strengthening Social Security and Medicare and in the days following his second State of the Union address has pushed the programs to the forefront. However, the Biden administration has yet laid out a set of specific policy plans to address either program.
This article originally appeared on USA TODAY: Debt ceiling fight spares Social Security, Medicare but rescue needed