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Social Security’s and Medicare’s Slow-Motion Fiscal Disaster ­- Social Security 2018 Trustees Report

Having our affairs in order is the greatest gift we can provide to our families and loved ones!

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

Recently the Social Security Board of Trustees released the 2018 report on the current and projected financial status of the Old-Age and Survivors Insurance and Disability Insurance (OASDI) Trust Funds. These combined funds are projected to become depleted in 2034, the same as last year’s report with 79 percent of benefits payable after that time. The DI Trust Fund will become depleted in 2032, extended from last year’s estimate of 2028, with 96 percent of benefits still payable. Social Security trust fund will be depleted in 17 years, according to trustees report. Per this report Medicare is projected to run out of funds originally in 2028. That date was rolled forward a year — to 2029 — in this year’s report. So it remains a real concern to anyone on social security & Medicare. These reports are true under the current law. Congress may elect to change current laws to preserve these funds.

If we knew a financial reckoning were due in 30 years, would we freak out? Probably not—heck, we might be dead by then. Twenty years? Nah, not really. What about eight years from now? That might get our attention! And that’s where we stand with Medicare, the giant health care program for those 65 and over – per Rick Newman columnist for Yahoo Finance. The latest annual assessment of the financial health of the Medicare and Social Security programs finds that the main reserve fund that helps finance Medicare will run dry by 2026. That’s three years sooner than the government predicted last year.

The hospital insurance trust fund, as it’s called, helps cover the cost of Medicare Part A, which includes hospital
visits, home health services, nursing facilities and hospice care. The insolvency of the fund doesn’t mean Medicare will go broke. It means there will be no money in reserve, leaving only current tax inflows to cover Medicare’s costs. In 2026, those tax revenues will cover 91 percent of the costs for Medicare Part A, according to the program’s trustees. The portion of costs covered by tax revenues will fall to 78 percent by 2039, and then improve gradually.

As Medicare runs short of money to pay its bills, it will probably reduce payments to providers (physicians, hospitals, labs, etc). Some providers may absorb the hit; others providers might stop accepting Medicare patients all together OR accept payment when service is received instead of processing Medicare. “It’s a very sad situation,” says Marc Goldwein of the Committee for a Responsible Federal Budget, a nonprofit group that monitors fiscal policy. “No one wants to talk seriously about Medicare. It seems like we’re in a really bad place, and I don’t see how we get to a better place.”

The situation could become direr if there’s a recession during the next eight years—which could happen given that the economy is now in one of the longest expansions in US history. The forecast for 2026 is based on average GDP growth rates of about 2.5% per year. But growth typically turns negative during a recession, and tax revenues almost always drop, which would leave even less money coming in to cover Medicare expenses, depleting the reserve fund sooner than 2026. And all of this occurs as overall federal debt, now more than $21 trillion, marches ever higher, leaving less and less wiggle room for Washington to borrow in an emergency since it already borrows so much on an everyday basis. If the government began borrowing to pay for the shortfall in retirement programs, it would make a possible debt crisis more likely.

What are our options? Costs of healthcare increase as we age. Without Medicare OR more limited Medicare – what are our options? Medicare Advantage Plans are issued by private insurance companies taking the responsibility for claims away from Medicare and places claims – medical claims, prescription drug claims – in the private sector. . Advantage Plans continue to offer medical benefits comparable to Medicare or improved benefits from Medicare. Further – many Advantage plans offer additional benefits and services beyond original Medicare. Limited vision, dental, hearing benefits normally not covered by Medicare are included with many Advantage Plans. Other benefits and services some Advantage Plans offer are fitness club memberships along with some shopping credits. Older Medicare beneficiaries requiring very costly emergency response systems receive this benefit at no cost. Emergency response system equipment and monthly service fees are waived. These systems are available at no cost.

Monthly Community Meetings focus on these expanded benefits. This month we continue our meetings in both Iowa and Illinois. Iowa Community Meetings are July 17 & 19. Illinois Community Meetings are July 24 & July 26.