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Social Security and Medicare are expected to need to cut monthly benefits in less than a decade as the trust funds for both programs are on track to run dry earlier than previously predicted.
A report released on Wednesday from the Social Security and Medicare Boards of Trustees pushed up the programsโ go-broke dates, meaning the point at which they would not have enough money to fully cover benefits.
The worsening projections are in part because of a new law impacting Social Security and increasing health care costs, according to the report.
Hereโs what to know about the approaching funding cliffs.
How long will Social Security stay solvent?
The go-broke date for Social Securityโs trust funds was pushed up to 2034, from last yearโs estimate of 2035.
The funds cover old age and disability recipients. The program covers more than 60 million people in the U.S.
What about Medicare?
Last yearโs report set the go-broke date for Medicareโs hospital insurance trust fund as 2036. But the latest report pushed up that date to 2033.
Medicare is a federal health insurance program that offers coverage for people 65 and older, as well as people with certain disabilities. More than 68 million people in the U.S. are enrolled in the program.
The hospital insurance trust fund pays for Medicare Part A, which covers care provided in hospitals and skilled nursing facilities, as well as some in-home care. It also helps pay for hospice care.
Why have the go-broke dates moved up?
The report largely attributes the Social Security go-broke date being pushed up to a new law, the Social Security Fairness Act, which took effect in January. The law repealed the Windfall Elimination and Government Pension Offset provisions of the Social Security Act, which โincreased projected Social Security benefit levels for some workersโ and affected the go-broke date for Social Securityโs trust funds, according to the report.
Last yearโs expenses for Medicareโs hospital insurance trust fund were also greater than initially anticipated, according to the report, which contributed to the go-broke date for the program being pushed up.
What happens after the go-broke dates?
The funds hitting their go-broke dates doesnโt mean that there wonโt be any funds to cover any benefits after that point. After 2034, Social Security would only have enough funds to cover 81% of benefits. After 2033, Medicareโs hospital insurance trust fund would only be able to pay 89% of costs.
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