En español | The annual report from the Social Security trustees projects that the combined trust funds — one for retirees and one for disability payments — would exhaust their reserves in 2035, the same as reported last year.
A separate report from the trustees on Medicare projects that the trust fund that pays for Medicare's 61.2 million Part A beneficiaries would be depleted sooner, in 2026, also unchanged from last year's report.
The trustees note that the current reports, released on April 22, do not consider the impact of the coronavirus outbreak.
"Medicare and Social Security are more crucial than ever as Americans face the one-two punch of the coronavirus's health and economic consequences,” says AARP CEO Jo Ann Jenkins. “The security provided by Social Security's guaranteed benefits and Medicare's health coverage is indispensable.
"Today's reports show that both programs remain strong. However, it is crucial for Congress to come together in a bipartisan way to address the long-term funding challenges to ensure individuals will get the benefits they have earned."
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Social Security provides income to 45 million retired workers and 3.1 million dependents, and represents about 33 percent of their retirement income. Social Security also covers about 6 million survivor beneficiaries of deceased workers and 10 million disabled workers and their dependents.
If the trustees’ projections are correct, when Social Security's combined trust funds are exhausted in 2035, the program will still be able to pay 79 percent of its current benefits.
Specifically, there are two Social Security trust funds: The Old-Age and Survivors Insurance (OASI) trust fund and the Disability Insurance (DI) trust fund. The OASI trust fund, which pays retirement and survivor benefits, is projected to become depleted in 2034, unchanged from last year. After that, it would be able to pay 76 percent of scheduled benefits with continuing tax income.
The DI trust fund is estimated to become depleted in 2065, extended 13 years from last year's estimate of 2052, with 92 percent of benefits still payable thereafter.
Medicare gives vital access to medical care when those 65 and older most need it. Medicare's Part A Hospital Insurance (HI) trust fund, which pays hospital inpatient expenses, would still be able to pay 90 percent of its benefits when its trust fund is exhausted in 2026.
The Supplemental Medical Insurance (SMI) trust fund for Medicare Part B, which pays for physician and outpatient services, and Part D, which covers prescription drug benefits, is solvent indefinitely, thanks to financing from general revenues and beneficiary premiums.
"One way to protect Medicare is to lower the cost of health care and prescription drug prices,” Jenkins says. “AARP is heartened that recent legislation will help older Americans and provide economic stimulus while ensuring that the Social Security and Medicare trust funds will be made whole as employer payroll tax payments are delayed. We stand ready to work with Congress and the administration to improve the health and financial security of all Americans.”
Impact of pandemic on trust funds uncertain
The loss of jobs in 2020 due to the coronavirus outbreak — and therefore the loss of payroll tax revenue to both Social Security and Medicare — means that the projections reported by trustees may be overly optimistic, especially in the short term.
The U.S. has shed 22 million jobs since the coronavirus outbreak shut down large swaths of the economy a month ago, and that means 22 million workers (and their employers) won't be contributing payroll taxes to support Social Security and Medicare.
Others who have seen pay reductions will contribute less into the funds. There have been approximately 800,000 confirmed U.S. cases of COVID-19, the disease caused by the new coronavirus, to date and nearly 45,000 deaths, according to the Centers for Disease Control and Prevention.
Social Security Commissioner Andrew Saul cautioned that this year's dramatic economic slowdown could ultimately paint a more dire picture for both Social Security and Medicare. The current projections do not reflect the potential effects of the COVID-19 pandemic on the Social Security program.
"Given the uncertainty associated with these impacts, the trustees believe it is not possible to adjust estimates accurately at this time,” he says. “The duration and severity of the pandemic will affect the estimates presented in this year's report and the financial status of the program, particularly in the short term."
The trustees warned in a letter to Congress that the HI trust fund for Medicare Part A has less than 10 years before it runs short of money, and that Congress should increase taxes, adjust benefits or enact a combination of changes to ensure its long-term solvency. Payroll taxes from U.S. workers and their employers provide nearly all the money for Social Security and a large source of funding for the Medicare program.