The cuts and legislative changes to the U.S. healthcare system would directly affect the elderly. Now, retirees could face an immediate 23% cut in Social Security payments and an 11% reduction in Medicare hospital coverage, as early as 2033, according to Neal K. Shah, president of Counterforce Health. According to the latest data, Social Security and Medicare are facing a major funding crisis sooner than expected.
Monthly payments to nearly 63 million Social Security retirees and beneficiaries could be reduced by 23% in just eight years if the U.S. Congress does not intervene and strengthen the program, according to the agency’s annual report.
“OASDI fund does not meet the Trustees’ short-term”
The report, signed by Scott Bessent, Secretary of the Treasury, and Managing Trustee of the Trust Funds; Lori Chavez-Deremer, Secretary of Labor, and Trustee; Robert F. Kennedy Jr., Secretary of Health and Human Services, and Trustee; Frank J. Bisignano, Commissioner of Social Security, and Trustee, details that “Old-Age, Survivors, and Disability Insurance (OASDI) reserves, together with projected program revenues, are sufficient to cover the projected cost of the program for the next 9 years, based on interim assumptions. The reserves-to-annual cost ratio is projected to decline from 169% in early 2025, falling below 100% to 95% by early 2029” and continues: “Because this ratio falls below 100% by the end of the tenth projection year and remains below 100%, the hypothetical OASDI fund does not meet the Trustees’ short-term financial sufficiency test.”
Given all of the above, the report concludes these data by stating that “considered separately, the OASDI Trust Fund does not meet the short-term financial adequacy test, but the DI Trust Fund does. OASDI reserves are projected to be depleted during 2033 under interim assumptions. DI reserves, together with projected program revenues, are sufficient to cover the projected cost of the program over the next 10 years.”
This would particularly affect those around 59 years old today, as they will reach retirement age just as their funds run out. Although Social Security only covers, on average, 40% of pre-retirement income, approximately two-thirds of retirees rely on these payments to cover more than half of their expenses, according to the National Reverse Mortgage Lenders Association.
More people have begun claiming benefits at younger ages
The change, according to the trustees, is due to increased spending on hospital care in 2024, a trend projected to continue in the coming years. It is also due to a new law that expanded benefits for nearly three million former public sector workers whose jobs were not covered by Social Security. In addition, more people have begun claiming benefits at younger ages, fearing lower payments in the future. Kathleen Romig, director of the Center on Budget and Policy Priorities, has said that the massive migration and flight of migrants will also hurt the program’s revenue, as most represent net income for Social Security.
Implementing changes sooner rather than later will help those who benefit from these adjustments cope with future expenses and payments with greater peace of mind. Neil Shah advises: “If possible, delay applying for benefits, build up funds in HSA and Roth accounts to diversify your taxes, adjust your budget for a possible 25% cut, and secure robust coverage now with Medigap or Advantage plans.”
