Medicare trust fund to be exhausted in 2031, trustees project
Zachary Halaschak
The Medicare hospital trust fund will be exhausted in 2031, the program’s trustees projected on Friday.
The Hospital Insurance Trust Fund, which pays for inpatient care and hospital services for Medicare trustees, will be able to pay 100% of total scheduled benefits for eight more years, three years longer than was reported last year.
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BIDEN GETS TALKING POINT ON MEDICARE AT EXPENSE OF UNSUSTAINABLE DEFICITS
The extended timeline gives a bit more breathing room to Congress, where the looming depletion of the trust fund has become a top political issue as President Joe Biden tries to portray Republicans as seeking to cut entitlement benefits for seniors.
Nevertheless, the new projections show that, after 2031, the fund’s reserves will become depleted and the continuing program income will be enough to pay just 89% of total scheduled benefits.
Meanwhile, the projected reserves of the combined Social Security trust fund and the Disability Insurance Trust Fund will become exhausted in 2034, which is one year earlier than was projected last year. At that time, beneficiaries would face an immediate 20% cut.
“Social Security and Medicare are two bedrock programs that older American rely upon for their retirement security,” Treasury Secretary Janet Yellen said. “The Biden-Harris Administration is committed to ensuring the long-term viability of these critical programs so that retirees can receive the hard-earned benefits they’re owed.”
The looming deadlines are another reminder for lawmakers that the prized entitlement programs can’t last in perpetuity without action being taken to maintain their solvency.
Biden has sought to present himself as the defender of Social Security and Medicare, two of the main drivers of increased spending that account for more than a third of government payments.
Former President Donald Trump, who is now running for another term, has also taken up the mantle of defending the entitlement programs. He has urged the GOP, which is pushing for sweeping spending cuts, to leave Medicare and Social Security alone and to back away from any plans to cut the popular programs.
Biden recently introduced his proposed budget for fiscal 2024, which involves about $6.9 trillion in spending and would result in a $1.8 trillion deficit. Included in the budget is a plan to stave off the insolvency of the Medicare hospital insurance trust fund.
Biden’s budget would make the program solvent for 25 years without cutting any of the program’s benefits.
In addition to expanding drug pricing reforms, the Biden proposal would raise payroll taxes for those earning more than $400,000 to fund Medicare benefits. Specifically, it would hike the Medicare tax rate for taxpayers earning an annual income of more than $400,000 from 3.8% to 5%. It would also redirect funds raised by an existing investment tax from the general fund to the Medicare trust fund.
“The President has made his position clear: we will do everything we can to strengthen Medicare for the 65 million beneficiaries today and millions more in the years to come,” Health and Human Services Secretary Xavier Becerra said. “Medicare is part of the fabric of this nation — now and for future generations who will count on it. We call on Congress to join the President’s fight and work with us to deliver on this commitment for the American people.”
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Although the Biden budget proposal includes a bevy of tax hikes, it does not outline a path to a balanced budget, nor does it envision stabilizing the debt. Instead, the federal debt would rise to record highs and keep increasing.
The budget also calls for higher spending for the rest of the decade, resulting in total deficits of $17 trillion.