Social Security Will Tap Trust Fund for First Time Since 1982

Plus, Medicare’s financial problems have gotten worse By Yuval Rosenberg and Michael Rainey Social Security Will Need to Tap Trust Fund for First Time Since 1982 Medicare’s financial problems worsened last year while Social Security still faces a significant long-term financial crunch — and will need to tap into its reserves for the first time in 36 years, according to annual reports released Tuesday by the programs’ trustees. Here are the details you need to know about the outlook for safety net programs that more than 60 million American rely on — and that together account for about 40 percent of federal spending: Social Security ([see the report]( - Social Security encompasses two programs, one for retirees and one that provides disability benefits. Taken together, the trust funds for the two programs are projected to be depleted in 2034, the same as last year. Taken separately, the fund for retirees is now expected to be depleted in 2034, a year earlier than last year’s report, while the disability insurance reserves run out in 2032, four years later than projected last year. - For the first time since 1982, Social Security’s cost is projected to exceed its total income this year, forcing the program to tap into its $2.9 trillion trust fund to cover benefit payments. - Depletion of the Social Security trust funds means that the program would no longer be able to pay its full benefits. Continuing payroll tax revenues to the combined trust funds would be sufficient to cover 79 percent of scheduled benefits starting in 2034. - To make Social Security fully solvent for 75 years, the report says, revenues would have to be increased by an amount equivalent to a permanent payroll tax rate hike of 2.78 percentage points, from 12.4 percent to 15.18 percent, or scheduled benefits would need to be cut by as much as 21 percent, depending on whether the reduction in payments was applied to all beneficiaries or only those who become eligible starting this year. Some combination of revenue increases and benefit changes could also eliminate the projected shortfall. Medicare ([see the report]( - Medicare’s Hospital Insurance Trust Fund, which is known as Medicare Part A and covers inpatient care for older Americans, will be depleted in 2026, three years earlier than projected last year. The deteriorating outlook is the result of lower-than-expected wages in 2017, and thus lower payroll tax collections. Last year’s Republican tax cuts also reduced projected revenue from taxes on Social Security benefits. The program’s spending, meanwhile, was slightly higher than expected. - Total Medicare expenditures were $710 billion last year. The trustees project that Medicare costs will grow from about 3.7 percent of GDP in 2017 to 5.8 percent by 2038, and will continue to rise to about 6.2 percent of GDP by 2092. - The trustees said the share of Medicare hospital benefits that can be covered by the program’s payroll tax revenues will decline from 91 percent in 2026 to 78 percent in 2039 before rising to 85 percent in 2092. President Trump has said he won’t cut Social Security or Medicare, and his administration says that a strong economy will bolster both programs. “The Administration’s economic agenda — tax cuts, regulatory reform, and improved trade agreements — will generate the long-term growth needed to help secure these programs and lead them to a more stable path,” Treasury Secretary Steven Mnuchin said in a [statement]( Tuesday. But as Robert Pear of The New York Times [notes]( based on the new trustees’ reports, “so far that does not appeared to have happened.” Number of the Day: 2.2 The ratio of workers to Social Security beneficiaries will fall from about 2.8 last year to 2.2 by 2035, when most Baby Boomers will have retired, according to the new trustees’ report. In 1960, there were about five workers for every beneficiary. McConnell Cancels Senate’s August Recess Senate Majority Leader Mitch McConnell announced Tuesday that he will cancel the Senate’s August recess as Republicans look to push through more of President Trump’s judicial and executive branch appointments and make progress on annual appropriations bills. "Due to the historic obstruction by Senate Democrats of the president's nominees, and the goal of passing appropriations bills prior to the end of the fiscal year, the August recess has been canceled," McConnell said in a [statement](. The Senate had been tentatively scheduled to be in recess for four weeks, from August 6 until after Labor Day on September 3. Under the new schedule, they’re expected to be away for the week of August 6 before returning to Washington for the rest of the month. The change in schedule also has some [political benefit]( for Republicans as it helps keep Senate Democrats from campaigning at home as 24 of the seats they now hold are up for re-election. "The fact that the Republicans have resorted to keeping Democrats off the campaign trail in August shows you just how nervous they are about November," a senior Democratic aide told [The Hill](. CMS Unveils New Scorecards for Medicaid and CHIP The Trump administration is rolling out a scorecard that will evaluate states on key metrics for Medicaid and the Children's Health Insurance Program. Seema Verma, administrator of the Centers for Medicare and Medicaid Services, said the scorecards are a “conversation starter” that will help states explore varying outcomes for services provided, ranging from postpartum care to immunization levels. The Washington Post [said]( the scorecards are “part of a fundamental recalibration of the power relationship in Medicaid between the federal government and states,” as the Trump administration allows states more flexibility to institute their own rules — including, for example, new work requirements for Medicaid recipients — while being held accountable for their performance, though what exactly that accountability involves is still unclear. Click [here for more details]( on the initial version of the CMS scorecard, and [here for a national-level summary]( of some of the key data. A New Government Spending Tool from the Census How much do your state and local governments spend on education, recreation and health care? The U.S. Census has created a new tool that allows users to sift through reams of government data to create revenue and spending profiles at the state and local level. Overall, state and local governments spent more than $3 trillion in 2015, the most recent year available, with the District of Columbia ($22,762), Alaska ($21,023) and Wyoming ($15,026) leading the way on per capita spending. Click [here for a deluge of data from the State & Local Government Snapshot tool]( at the U.S. Census. Quote of the Day "I think the greatest threat domestically to the country is this $21 trillion debt hanging over the cloud of America and future generations.” – Outgoing Starbucks Chairman Howard Schultz, on [CNBC]( Tuesday. Schultz announced Monday he will retire from the coffee company at the end of the month, stoking speculation that he may run for president in 2020. 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