Medicare funds are expected to be exhausted in 2026, and Social Security will be unable to pay full benefits starting in 2034, according to a report released Tuesday by the programs’ trustees, the Associated Press said.
“The finances of both programs have been significantly affected by the pandemic and the recession of 2020,” the trustees said.
Previously, Social Security was projected to be unable to pay full benefits in 2035. Now, the date has been moved up by a year, but Medicare’s date remains the same as estimated last year, according to the AP. The two programs have been under intense financial pressure from the coronavirus pandemic and the retirement of millions of baby boomers.
“Given the unprecedented level of uncertainty” from the pandemic, there is no consensus on what the long-lasting effects on the programs will look like, according to the report.
For more reporting from the Associated Press, see below.
The report noted that employment, earnings, interest rates and economic growth plummeted in the second quarter of 2020 after the pandemic hit the United States.
When the Social Security trust fund is depleted the government will be able to pay 78 percent of scheduled benefits, the report said.
Because a reduction in benefits of that magnitude would cause a political uproar, it is likely that Congress would find ways to recover the lost benefits, either by hiking the payroll taxes paid by current workers or by increasing government borrowing to cover the shortfall.
Government economic experts who prepared the Social Security report said recent increases in inflation mean the cost-of-living adjustment for 2022 will approach 6 percent, a whopping jump from the 1.3 percent COLA awarded for this year.
The Medicare “Part B” premium for outpatient coverage is projected to rise by $10 a month in 2022, to $158.50 under the report’s intermediate assumptions.
The new report, which has been delayed for a number of months, represents the government’s effort to assess the impact of last year’s pandemic and recession on the financial health of the two big benefit programs.
The U.S. economy lost a staggering 22.4 million jobs in March and April 2020 as the pandemic forced businesses to close or cut their hours and the economy went into recession.
But the recession turned out to be brief and hiring has bounced back as economic growth has resumed. Employers have brought back 16.7 million jobs since April 2020 but that gain still leaves the labor force 5.7 million jobs below where it was before the pandemic hit.