The disability-insurance program administered by the Social Security Administration faces a depletion of reserves in 2016, absent changes to funding, and incoming revenues will fund only 80 percent of promised benefits, a new government report said Monday.
Costs for the disability-insurance program have exceeded incoming revenues since 2005, and year after year nothing has been done to address the problem, said the report by the Social Security and Medicare Boards of Trustees.
The 2014 annual report on the status of government retirement programs for the elderly and disabled also projected crisis dates for Social Security and Medicare. But it was the looming shortfall in funding for disability-insurance programs that stood out.
“While legislation is needed to address all of Social Security’s financial imbalances, the need has become most urgent with respect to the program’s disability insurance component,” trustees said in the report. “Lawmakers need to act soon to avoid automatic reductions in payments to DI beneficiaries in late 2016.”
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Trustees said that Social Security will continue to take in more than it pays out through 2019, but would begin paying out more than it takes in at that point. Absent changes to funding mechanisms, reserves in a trust fund would begin being depleted, running out about 2033. From then on, incoming revenue from existing revenue would cover only about 75 percent of benefits promised to retirees at that point.
Medicare, the health insurance program for the elderly, fared a bit better in the trustee projections. Medicare’s Hospital Insurance (HI) Trust Fund faces depletion in 2030, four years later than was projected just last year.
That is “principally due to lower-than-expected spending in 2013 for most HI service categories, which reduced the … expenditure level about 1.5 percent and contributed to the Trustees’ decision to reduce projected near-term spending growth trends,” the report said.
The Obama administration took credit, saying the Affordable Care Act_ also dubbed Obamacare_ has brought down costs in the healthcare system.
“The outlook for Medicare has consistently improved since the passage of the Affordable Care Act,” Treasury Secretary Jacob Lew said in a statement Monday.
The broader outlook for Medicare, however, is hardly worthy of a victory lap.
Trustees projected that, absent changing to funding mechanisms, total Medicare costs are expected to soar from about 3.5 percent of the total economy last year to 5.3 percent by 2035 and about 6.9 percent decades later by 2088.
The non-partisan Congressional Budget Office on Monday posted a blog item noting it too had revised down some of its healthcare spending projections. The CBO now expects combined federal spending for major health programs to equal about 8 percent of the total economy in 2039. That’s down from 9.6 percent projected by the CBO in 2010.
The CBO number reflects a broader universe of medical spending than just Medicare and includes Medicaid, the Children’s Health Insurance Program and subsidies for insurance purchased through healthcare exchanges created as part of the Affordable Care Act.