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Social Security and Medicare Update – Going Broke? 2016 Trustees Report

By Richard J. Schillig, CLU, ChFC, LUTCF
Independent Insurance and Financial Advisor

A new congress is assembled in our nation’s capital. Of all the vital issues and concerns facing this new legislative session, ONE that should be first and foremost on member’s minds is our social security and Medicare programs. The trustees December 2016 report to congress continues to be concerning.

What’s happening with social security and Medicare – going broke? Can we continue to count on these programs? Both are considered America’s safety net providing vital monthly income and health benefits to retirees and disabled workers and their families. It’s no secret that an aging U.S. population, greater life expectancy along with increasing double digit inflationary health care costs are creating major fiscal challenges. Both social security and Medicare are funded primarily by payroll taxes that come out of the paychecks of current workers. This money is placed is specific trust funds; social security trust fund and Medicare trust fund. Each program draws on these funds to pay out benefits.

Social security has two trust funds; old age and survivors’ insurance that provides benefits to retired and deceased members and their families and disability income insurance benefit that provides benefits to disabled workers and families. Medicare also has two trust funds; a hospital insurance benefit that provides inpatient hospital care under part A and a supplemental medical insurance benefit under part B that provides physician and outpatient benefits and more recently prescription drug benefits under part D.

Every year the trustees of these trust funds release detailed reports to congress about the projected financial health of these programs. In the most recent 2016 report to congress the trustees noted the OASI (old age and survivors insurance insurance) that provides social security retirement and survivors benefits will be depleted in 2035. After that payroll taxes alone would cover only 77 percent of scheduled benefits. The disability income insurance fund is projected to be depleted much earlier – in 2023 – after which payroll taxes would cover only 89 percent of scheduled benefits. For Medicare the hospital insurance benefit is projected to be depleted in 2028 and subsequently would cover only 87 percent of benefits declining to 79 percent of benefits by 2040. The SMI (supplemental medical insurance) which covers Medicare part B and Medicare part D differs from the other trust funds in that it is funded by premiums and revenues from the US treasury and general fund instead of payroll taxes so it is automatically balanced under current law.

What do all these projections mean? Though social security and Medicare is in danger of collapsing entirely the clock is ticking faster on their ability to continue paying full benefits.

A variety of potential solutions have been on the table for years but there has been no political consensus or action. It remains to be seen whether this congress takes steps to strengthen America’s safety nets.

A copy of the trustees report to congress is readily available via internet. A google search of 2016 social security and Medicare trustees report will generate a nice concise summary of this report. Encourage all taxpayers, citizens and especially Medicare beneficiaries or soon to be Medicare beneficiaries to not only review the report but to require our elected officials to be alert to this approaching concern.
The bottom line on these reports serves to emphasize the importance of each of us as individuals to increasingly take responsibility for our own futures. Programs are available; IRAs, 401ks, 457 plans, 403b and many other programs for individual planning allow for the accumulation of assets for retirement. Further when retirement is achieved we must continue additional planning in order to provide continuation of lifetime income the services of a professional planner to address these issues is critical for each of us as individuals and for our families.

During this 2017 New Year we will continue our monthly Community Meetings designed to assist in maximizing the use of Medicare.

Changes to other Medicare costs:

• Other Medicare Part A and Part B costs will change in 2017, including the following:
• The annual Medicare Part B deductible for Original Medicare will be $183, up from $166 in 2016.
• The monthly Medicare Part A (Hospital Insurance) premium for those who need to buy coverage will cost up to $413, up from $411 in 2016. However, most people don’t pay a premium for Medicare Part A.
• The Medicare Part A deductible for inpatient hospitalization will be $1,316, up from $1,288 in 2016. Beneficiaries will pay an additional daily co-insurance amount of $329 for days 61 through 90, up from $322 in 2016, and $658 for stays beyond 90 days, up from $644 in 2016.
• Beneficiaries in skilled nursing facilities will pay a daily co-insurance amount of $164.50 for days 21 through 100 in a benefit period, up from $161 in 2016.

To view the Medicare fact sheet announcing these and other figures, visit Medicare.gov.
For more information on costs and benefits related to Social Security and Medicare, visit Socialsecurity.gov and Medicare.gov.

Richard J. Schillig, CLU, ChFC, LUTCF is an Independent Insurance and Financial Advisor with RJS and Associates, Inc. He can be reached at (563) 332-2200.