The trust fund that backs the Medicare Part A hospitalization program still has some life in it, but the trust fund that backs the Social Security Disability Insurance (SSDI) program could empty out in time for the 2016 elections.
Congress tried to help employers and workers get over the Great Recession by temporarily reducing payroll taxes in 2011 and 2012.
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Because of a combination of that temporary loss of income, lingering weakness in payroll tax revenue, and low interest earnings on SSDI trust fund assets, the disability insurance trust fund is already paying out more money than it is taking in.
The disability insurance trust fund started 2014 with assets equal to only about 62 percent of the amount of cash it spends each year on benefits, the Social Security trust fund trustees report. The trustees of the disability fund say it is on track to run dry in the fourth quarter of 2016.
- If Congress does nothing, and the SSDI trust fund runs dry in 2016, the SSDI program would probably have enough payroll tax revenue to meet 81 percent of its benefits obligations.
- If nothing changes, the Social Security retirement benefits trust fund could have some cash in it up until 2035.
- Together, the Social Security retirement trust fund and the SSDI trust fund have enough reserves and enough income to pay full benefits until 2033.
In theory, the trustees say, Congress could put both programs on a firm footing for 75 years by increasing the size of the payroll tax that supports them to 15.23 percent of taxable payroll, from 12.40 percent today, or by immediately cutting current and future benefits 17.4 percent.
Reduced use of medical care, and efforts to hold down payments to the insurers that offer Medicare Part C plans — Medicare Advantage plans — helped cut Medicare hospitalization insurance fund expenditures sharply in 2013. Because spending was down, program actuaries now estimate the trust fund will have some cash in it until 2030. Last year, the trustees estimated the fund would run out of cash in 2026.
If the trustees are correct, and Congress makes no changes to the program, Medicare will have to start paying the promised benefits using current-year premiums starting around 2030. Incoming tax revenue could cover about 85 percent of the cost of the promised benefits in 2030 and 75 percent of the cost of the promised benefits in 2050, the actuaries estimate.
In theory, the trustees say, Congress could put the Medicare hospitalization fund on firm financial footing for 75 years by immediately increasing the current 2.9 percent payroll tax that supports the fund to 3.77 percent, or by immediately reducing current and future expenditures by 19 percent.