According to Social Security and Medicare Board of
Trustees’ financial review of the programs, Medicare’s
hospital-insurance trust fund will be used up by 2019 if no
changes are made to the program, and Social Security is
projected to exhaust its funding in 2041 if no changes are
The Medicare program faces tougher challenges than Social Security due to rising health care costs, according to the report. At the point where the funds run out, existing law would require the entitlement program, which serves the elderly and some disabled beneficiaries, to slash benefits across the board. The program already has a negative cash flow in its trust fund, which is also filled by payroll taxes.
Treasury Secretary Henry Paulson said in a statement that the report underscored the need to address fiscal pressures facing both programs as the Baby Boom generation prepares for retirement. “The longer we delay, the larger the required adjustments will be – and the burden of making those adjustments will fall more heavily on future generations,” he said.
The Social Security program is now running at a surplus and is funded by a payroll tax of 12.4% split between employers and employees on income up to $97,500. As the baby boomer generation begins retiring in droves, the Social Security fund is forecasted to start outstripping its revenues by 2017, according to the report.
For a summary of both the Medicare and Social Security report go here .
For the full Medicare report go here .
For the full Social Security report go here .