September 1, 2021

Social Security and Medicare Are Facing Serious Shortfalls

In the updated reports released by the Trustees for Social Security and Medicare on August 31, they found little change in the depletion dates of their trust funds. The Social Security Trustees note that the Old-Age and Survivors Insurance (OASI) Trust Fund is now expected to become depleted in 2033, compared to 2034 in last year’s report. The Medicare Trustees project that the Hospital Insurance (HI) Trust Fund would become depleted in 2026, which is unchanged from last year’s projection.

Those reports are the first to include adjustments to account for the effects of the coronavirus (COVID-19) pandemic. According to the trustees:

“Employment, earnings, interest rates, and GDP dropped substantially in the second calendar quarter of 2020 and are assumed to rise gradually thereafter toward recovery by 2023, with the level of worker productivity and thus GDP assumed to be permanently lowered by 1 percent. In addition, the pandemic and recession are assumed to lead to elevated mortality rates over the period 2020 through 2023 and delays in births and immigration in the near term.”

Nevertheless, there was little change in the dates of trust fund depletion for these key programs because of other, offsetting factors. However, it’s clear that the funds remain on an unsustainable path, despite many available options to improve their finances.

If depletion of the trust funds occurs, absent legislative changes, millions of individuals could face an immediate cut in their Social Security benefits and payments to their medical providers from Medicare would be reduced. Those cuts would affect tens of millions of Americans, and have particularly devastating effects on vulnerable populations.

By the Numbers: 2021 Trustees Reports

Related: How Will the Coronavirus Pandemic Impact Social Security’s Finances? Here’s What Four Different Analyses Say

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