SALT LAKE CITY — The U.S. Medicare program will become insolvent in 2026, three years before officials originally believed, the U.S. Department of Treasury announced Tuesday. In addition, the Social Security program remains on pace to become insolvent in 2034.
But what does that mean for you now?
First off, Medicare is the federally-funded insurance program those 65 or older, as well as persons with certain disabilities, individuals with permanent kidney failure and people with amyotrophic lateral sclerosis (commonly known as ALS or Lou Gehrig’s Disease), according to the Social Security Administration website.
Social Security, which was created in 1935 during the New Deal era, is the “economic security” for retirees, disabled individuals and families of those who have retired or were disabled or killed on the job, according to the National Academy of Social Insurance. In all, it said about 169 million people pay taxes for the program and about 61 million collect benefits monthly.
There has been constant fear the U.S. government wouldn’t be able to cover the costs of the programs for years.
“We’ve heard about Social Security running out of money, there won’t be enough for me, the concerns around the longevity of the program for years,” said Devin Pope, senior wealth adviser for Albion Financial Group in Salt Lake City. “Right now, in 2034, the scheduled revenue or tax receipts are only enough to pay roughly about two-thirds or three-quarters of scheduled benefits.
“For those planning in the future, it’s probably worthwhile for them to consider that, ‘Well, when I look at my Social Security statement, take it with a grain of salt knowing that I may only be entitled to three-quarters of what they’re saying there because that’s the only revenue that’s going to be enough to come in when I reach full retirement age for those retiring in 2034 and beyond,’” he added.
Pope said he wouldn’t be surprised if changes to the programs happen in the future to keep it afloat. To that point, U.S. Treasury Secretary Steven Mnuchin also said in a statement Tuesday that despite the grim outlook, there was still time to fix both programs and that concerns were centered over “certain long-term issues.”
Adjustments have already been made to Social Security since it began. The minimum age for receiving benefits was already adjusted from 65 to 67 for those born in 1960 or later, according to the Social Security Administration. The early benefits minimum has remained at 62.
Increased life expectancy has been the largest problem the program has faced, Pope said. Average life expectancy has increased dramatically since the program was first implemented while the minimum age requirement has remained the same.
Life expectancy average was 61 in 1935 and 79 in 2015, according to Our World in Data. This means an average increase in how long citizens use the program benefits, and with that, an increased amount of citizens making Medicare claims.
"It's almost like a double-edged sword (because) you have people living on Social Security longer in their life and you also have them using their Medicare benefits for health care and using more Medicare benefits, more prescription drugs treatments and things to keep them living longer," Pope said. "The cost of both programs continue to increase because of life expectancy and people are living longer."
With the baby-boomer generation at retirement age, there's also a significant growth in the number of people in the program. Pope hypothesized further increases to the minimum retirement age to the two programs could be made to help balance out the increasing life expectancy.
That could also mean people will spend more time in the workforce before they retire.
Pope also said he wouldn’t be surprised to see Medicare premium increases and adjusted gross income thresholds decrease to allow more people to pay higher premiums on Medicare taxes.
So is there a possibility both programs are eventually scrapped? That's hard to tell. But Pope said the problem has been the lack of fixes in long-term projects of the programs.
"That would be a huge challenge on both standpoints because there is such a push that — is health care a right or is it something we have to earn?" he said.