The 2022 Social Security and Medicare Trustees’ report shows slight improvements in the finances of both Medicare and Social Security.
According to Dean Baker, senior economist at the Center for Economic and Policy Research, the Affordable Care Act helped Medicare’s finances. He says: “This is hugely important, and little appreciated. The reduced payments to private [Medicare Advantage] plans operating within the Medicare program are attributed to the Affordable Care Act (ACA) reining in health care cost growth.
Baker finds that the current estimated shortfall for Social Security is not much greater than the projected savings to Medicare as a result of the Affordable Care Act.
Social Security is seeing small improvements because fewer people are receiving disability benefits and the US recovered quickly from the recession caused by the COVID-19 pandemic. Consequently, Social Security’s shortfall over the next 75 years dropped to 3.42 percent of payroll from 3.54 percent of payroll.
That said, we know that the Trump administration made it harder for people to receive Social Security disability benefits. So, Social Security’s better financial footing might stem from fewer people receiving disability benefits than should.
Medicare’s financial footing improved in part because its spending declined. Its premiums rose substantially because the government factored in payment for an expensive Alzheimer’s drug that it ultimately decided not to cover, except in the most limited situations. The premium hike underscores the power of the pharmaceutical industry to set sky high prices at the expense of taxpayers and people with Medicare.
According to the Trustees, the federal government is seeing higher tax income, which also helps the financial condition of Social Security and Medicare. Social Security reserves are expected to last until 2035–a year longer than projected last year–as of now. Medicare’s Part A Hospital Insurance (HI) trust fund reserves are expected to last until 2028. That’s two years later than previously projected. Medicare’s long-term financial situation also improved slightly, with a 75-year shortfall in the Hospital Insurance Trust Fund now at .70 percent of taxable payroll, down from .77 percent.
Even with all reserves depleted, both Medicare and Social Security will continue. Social Security could pay about 80 percent of benefits with its annual income from payroll contributions. Medicare Part A could pay about 90 percent of benefits. Medicare Parts B and D costs in addition to premiums are paid for with general revenue, so are fully funded.
In its 2022 budget, the Biden Administration proposed closing a tax loophole that would strengthen the Medicare Part A trust fund for a long time. It would require high-income taxpayers with pass-through business income to pay the Medicare tax on self-employment income and the net investment income tax on unearned income. This additional tax money would go to the Part A trust fund.
We now need Congress to slow down Medicare spending. It could do so through allowing Medicare to negotiate drug prices. It could also do so by ending overpayments to Medicare Advantage plans.
We also need to strengthen Social Security through additional tax revenues. Congress should lift the cap on Social Security payroll contributions. Medicare payroll contributions are not capped, nor should Social Security contributions be.
Here’s more from Just Care:
- In the hands of Republicans, Social Security is at serious risk
- Social Security benefits projected to increase 8.6 percent in 2023
- Congress should scrap the Social Security cap
- To strengthen the Medicare Trust Fund, Congress cannot allow Medicare Advantage overpayments to continue
- Roundup: 2022 Medicare benefits and more
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