We recently published a blog on the impending crisis concerning funding of Medicare and Social Security benefits. The numbers of inquiries on this were substantial so I am writing additional information on the problem.
One issue is that Congress appears reluctant to address the issue especially given the coming Presidential election and the obvious effect changes would have on the deficit budget if the present systems are maintained. Government officials that oversee the future of Medicare and Social Security have discovered troubling facts concerning the future of these essential programs. Medicare is likely to become insolvent by the year 2026, while the insolvency of Social Security is estimated for some time in 2035. No solutions have been proposed as of this date but concerns are increasing because any structural changes must be well planned and funded which will require consensus building and focus on details.
Medicare and Social Security are both factors of the United States financial support system that use government reserves in order to provide vital assistance to those in need, in particular, the sick and elderly.
Medicare is for those who are 65 and order, have proven disabilities, or suffer from specific health issues. Medicare is offered in a few parts that offer benefits for hospital insurance, medical insurance, and prescription drug coverage. Medicare’s hospital, outpatient care, and prescription drug benefits have totaled about $740 billion.
Social Security is a pay-as-you-go program that most citizens contribute to annually in the form of taxes. This economic security is then meant to provide for retirees, the disabled, and families of retired individuals, disabled, or deceased workers. Once on Social Security, the beneficiaries are paid a monthly income to support themselves as needed. The general idea is that current workers would pay now, older workers benefit, and then the cycle continues. It is the largest government program available and costs $853 billion on top of $175 billion for disability benefits as of last year.
While the year of Social Security insolvency was pushed back one estimated year in recent reports, Social Security based on current trends is expected to declare a 1.8% cost-of-living increase for 2020. That being said, the disability program is now estimated to remain solvent for an additional 20 years, through 2052.
Both of these systems becoming insolvent essentially means that the funds put into the programs will not be enough to pay the debt that they have promised beneficiaries. If a solution does not arise soon then the entire structure could collapse in a way that is detrimental to many citizens. Sudden and extreme automatic cuts on certain elements of these programs are just one possible future that will lead to disorder if it is not swiftly addressed. In short, many would be denied what they need to simply survive.
While both the republican and democratic party agree that this is a situation that requires a sooner-the-better approach, US President Donald Trump’s office has yet to place this as a high-priority issue, but refuses to declare any benefit cuts to the retirement program. While any moves to protect these programs from insolvency would be viewed as drastic steps, the closer to these projected insolvency years it gets, the more drastic the steps will become.
Sarah Sanders, White House press secretary, states in a report that when it comes to Medicare, there is a great need for “serious-minded” lawmakers to work with the administration on bipartisan changes to lower costs, eliminate fraud and abuse, and preserve the program for future generations. Sanders also notes that the idea of expanding Medicare would be an option that only leads to a complete government takeover of healthcare that could do a lot of damage to privately operated sectors.
While Sanders states the trouble with increasing Medicare, the opposite side also shows some major risks and faults. Cutting these programs too much could lead to hiking payroll taxes or raising the Medicare retirement age. It would also take a tax increase of 0.91 percent or a 19 percent cute to simply address the issue.
“We cannot afford to ignore this reality any longer,”, states Arkansas Rep. Steve Womack. Womack is the senior Republican on the House Budget Committee, and has consistently pushed for action and warned of the condition of both programs driving up federal spending.
While action is urged in hopes of giving ample time to warn and adjust to a new system, the truth is that all directions lead to difficulties. This fact is why many of the officials in Washington are attempting to ignore the issue until a clear direction appears, and why actions have yet to be put into motion despite the risks of stalling.
As Medicare and Social Security combined take 45% of the current federal budget, this is one of the largest financial issues in many years.
Those who are interested in learning more information about this issue, or who want to keep up-to-date on the latest legal proceedings, check out Newman & Shapiro Whistleblower Help Center and blog!