Medicare Will Be Insolvent In 2026, Sooner Than Expected; Social Security To Follow In 2034, by Tyler Durden

There it is in black and white—when the two big government pension and medical funds will go broke—and like most such estimates before, these are probably optimistic. At least when they go broke it won’t come as a surprise. From Tyler Durden at zerohedge.com:

Medicare’s trust fund has just eight more years of solvency until 2026, and Social Security will be exhausted in 2034, according to Thursday projections by the trustees for the government programs.

While Social Security’s expected depletion is unchanged from last year’s projection, the date for Medicare’s demise was moved up three years.

Social Security is made up of several funds; the Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI) are combined for the designation OASDI, while Medicare’s Hospital Insurance trust fund is designated HI.

If allowed to expire, beneficiaries would face an immediate reduction of around 20% in benefits.

The costs of Medicare and Social Security will increase substantially as a percentage of GDP through 2035 due to a sharp rise in beneficiaries as baby-boomers retire, and lower birth rates that have persisted since the baby boom resulting in slower growth of the labor force and GDP.

Social Security’s annual cost as a percentage of GDP is projected to increase from 4.9 percent in 2018 to about 6.1 percent by 2038, then decline to 5.9 percent by 2052 before generally rising to 6.1 percent of GDP by 2092. Under the intermediate assumptions, Medicare cost rises from 3.7 percent of GDP in 2018 to 5.6 percent of GDP by 2035 due mainly to the growth in the number of beneficiaries, and then increases further to 6.2 percent by 2092. The growth in health care cost per beneficiary becomes the larger factor later in the valuation period, particularly in Part D.

To continue reading: Medicare Will Be Insolvent In 2026, Sooner Than Expected; Social Security To Follow In 2034

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