In this file photo dated February 11, 2005, trays of printed Social Security checks are waiting to be mailed from the US Treasury Department’s Financial Management Service Facility in Philadelphia. The financial impact of the coronavirus pandemic on Social Security and Medicare will take center stage as the government releases its annual report on the state of basic pension programs on Tuesday, August 31, 2021. Bradley C. Bower / AP
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Bradley C Bower / AP
In this file photo dated February 11, 2005, trays of printed Social Security checks are waiting to be mailed from the US Treasury Department’s Financial Management Service Facility in Philadelphia. The financial impact of the coronavirus pandemic on Social Security and Medicare will take center stage as the government releases its annual report on the state of basic pension programs on Tuesday, August 31, 2021.
Bradley C Bower / AP
WASHINGTON – The sharp shock of the coronavirus recession brought Social Security a year closer to bankruptcy but left Medicare’s exhaustion date unchanged, the government reported Tuesday in a counter-intuitive assessment that heightened uncertainty about the country’s basic retirement programs.
The new projections in the Social Security and Medicare Trustees’ annual reports show that the massive Social Security Trust Fund will not be able to pay full benefits in 2034, instead of last year’s estimated exhaustion date of 2035. For the first time For 39 years, the cost of providing the service has exceeded the program’s total income from wage tax collections and interest for that year. From now on, social security will use its savings to pay the full benefits.
The Medicare Trust Fund Depletion Date for Inpatient Care was unchanged from last year and is estimated to be in 2026.
In the 1980s, financial warnings about social security prompted then-President Ronald Reagan and members of both parties in Congress to work together on a long-term solvency plan, but such action is unlikely in today’s bitter political climate. Democrats, who control the White House and Congress, assured that they would protect both programs.
“The Biden-Harris administration is committed to protecting these programs and ensuring that they continue to provide economic security and health care to older Americans,” Treasury Secretary Janet Yellen said in a statement.
The latest estimates reflect the push and pull of many factors emerging from the pandemic, and it may take years to fully correct the effects. The deep but relatively short recession cut income from wage taxes. But the death toll from COVID-19, which is centered on the elderly, reduced future social security payments. Hospitals were stressed by the influx of COVID patients, but Medicare didn’t have to pay for as many knee surgeries, colonoscopes, and other routine procedures. Both the birth rate and immigration, which underpin the two programs, fell.
For Social Security, the loss of wage tax revenue outweighed any savings on what the program would have paid out to people whose lives were lost in the pandemic. The report found employment, income, interest rates and economic growth plummeted in the second quarter of 2020 after the pandemic hit the United States.
“The finances of both programs have been severely impacted by the 2020 pandemic and recession,” the trustees said. But “in the face of unprecedented uncertainty,” there is no consensus on what long-term effects the pandemic would have. A pressing question for Medicare: will the population of beneficiaries who survived the pandemic be healthier overall, or will there be high numbers of new illnesses such as long-term COVID?
Social Security pays benefits to more than 65 million Americans, mostly retirees but also the disabled and survivors of deceased workers. Medicare covers more than 60 million elderly and disabled people. Both programs together make up more than 40% of the federal budget and have a stabilizing effect not only for families, but also for the economy.
While the long-term projections are sobering, there has been good news for social security recipients in the short term.
Government economists who produced the Social Security report estimated that recent increases in inflation are causing the cost of living adjustment to approach 6% in 2022, a huge increase from the 1.3% COLA granted for this year.
Some of this can lead to higher Medicare costs. Medicare’s “Part B” premium for home health insurance is set to increase by $ 10 per month to $ 158.50 per month in 2022, according to the interim assumptions of the report. The official number won’t be released until later this year.
Social security and Medicare remain under severe financial pressure with the retirement of millions of baby boomers living longer than previous generations.
When the Social Security Trust Fund runs out, the government can pay 78% of the planned benefits, the report said. If the Medicare inpatient trust trust fund runs out, it will only be able to pay 91% of expected costs, mostly hospital bills.
Since cuts of this magnitude would cause political turmoil, a future Congress will likely find ways to reclaim the lost benefits, either by increasing wage taxes for current workers or by increasing government borrowing to cover the shortfall. Medicare could also allow lawmakers to increase the premiums paid by beneficiaries.
It is unclear how Medicare predicts the debate on Capitol Hill about authorizing the program to negotiate prescription drug prices and then using the projected savings to provide new Medicare coverage for dental, visual and health care Hearing services will impact. Republicans have argued that any savings should be used to support the underlying program, not to add to the benefits.
The Medicare report foregone predictions about the new Alzheimer’s drug Aduhelm, which has a list price of $ 55,000. Most of the 6 million Americans dealing with Alzheimer’s will be covered by the program, although not all would be candidates for the drug.
The trustees’ reports, delayed for months, represent the government’s efforts to assess the impact of last year’s pandemic and recession on social security and health insurance.
The U.S. economy lost a staggering 22.4 million jobs in March and April 2020 as the pandemic forced companies to close or reduce their working hours and the economy plunged into recession.
However, the recession was short-lived and new hires recovered as economic growth resumed. Employers have brought back 16.7 million jobs since April 2020, but that increase still leaves the workforce 5.7 million jobs below what it was before the pandemic broke out.
Social Security and Medicare trustees include secretaries for the Treasury, Health & Social Services, and Labor Departments, and the Social Security Officer. They are to be joined by two “public trustees”, knowledgeable private individuals who act as the eyes and ears of the taxpayers and beneficiaries. But these positions have been vacant since July 2015 – before the end of the Obama administration. And there’s no Social Security Commissioner this year either, as President Joe Biden fired Andrew Saul, a holdover from the Trump administration.
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