The main trust fund behind Medicare, the US health-care program for the elderly and disabled, will be exhausted in 2026, three years earlier than was projected a year ago, the government said Tuesday.
However, the total annual cost of the Old Age, Survivors and Disability Insurance Program (OASDI) program - what we generally refer to as "Social Security" - is projected to exceed total annual income in 2018 for the first time since 1982, and to remain higher throughout the 75-year projection period.
Funding for Medicare will be depleted in 2026, three years earlier than what was projected in last year's report by the federal trustees for the program. A 2015 budget agreement extended the solvency of the Social Security Disability Insurance trust fund by temporarily allocating a larger share of the payroll tax to fund the disability program, which was in danger of imminent depletion. Spending was also projected to be somewhat higher than last year's estimates due to legislative changes that led to higher hospital and Medicare Advantage payments. The program's reserves are expected to be depleted in 2034, according to the trustees report, the same projection as previous year.
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More than 60 million Americans benefit from both programs, which provide a guaranteed income and healthcare for many retirees and the disabled. Options include raising the maximum income cutoff for imposing Social Security taxes, now $127,200. Politicians would pay them from general revenue and federal borrowing even after the trust funds, which are essentially bookkeeping devices, went to zero.
However, as now projected, it is highly unlikely that economic growth absent larger reforms could solve the programs' huge budget quagmire.
The trustees report is considered an annual wake-up call for the beleaguered programs, though consensus around ways to secure their future remains elusive.
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President Trump has said he won't cut Social Security or Medicare, and his administration says that a strong economy will bolster both programs.
They attributed the circumstances to last year's lower-than-expected wages, revenue-cutting legislation, heightened spending and an aging USA population.
The White House claims the long-running economic boom will help secure Medicare and Social Security's future.
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The aging of the population is another factor in the growth of the two entitlement programs. Their costs, however, are scheduledto grow from 2.1% of GDP in 2017 to 3.6% in 2037.