Social Security and Medicare are approaching a financial reckoning that Congress can no longer treat as a distant problem. The Social Security trust fund is projected to become insolvent in 2032, followed by Medicare’s hospital insurance fund in 2033.
If Congress does nothing, insolvency could mean cuts of roughly 10% across the board for Medicare and 25% for Social Security, according to an editorial board op-ed published Monday by The Washington Post.
The editorial board argues that the trust fund framework can obscure how both programs actually operate.
“Both programs are, and have always been, pay-as-you-go, where taxes collected from current workers fund benefits for current retirees,” the op-ed stated. “Social Security and Medicare both add to annual deficits right now, even though the trust funds still have positive balances on paper.”
Looming insolvency dates should force Congress to make choices rather than automatically rely on general revenue, the op-ed argues.
For Social Security, the board proposes moving toward a more targeted retirement system, similar to those used in other countries. A tax-funded benefit would provide a basic floor, while means testing would direct more benefits toward those who need them most. Above that floor, Americans would rely more heavily on compulsory private savings.
“Retirement accounts are the largest source of household wealth, greater than home equity,” the board wrote. “As a result, a big chunk of Social Security benefits goes to people who don’t need them. Over one-third of benefits are paid to seniors with incomes over $100,000. This share is likely to increase over time. Many younger people who are planning for retirement save under the assumption that they can’t rely on Social Security.”
Medicare, the board said, is the bigger fiscal challenge because its costs will continue to claim a larger share of the economy. Its proposed solution is to constrain spending growth without broadly cutting services already covered.
“One way to accomplish that would be to limit the addition of new services to the program,” the board wrote. “Spending on existing services is fairly well controlled. Most of the projected spending growth in excess of inflation would come from the addition of new billing codes — that is, coverage of new treatments. Limiting those additions might be more politically palatable than other cost controls because it wouldn’t require any reduction in services now covered.”
The editorial also calls for stronger Medicare means testing.
“Well-off seniors should be paying full freight for their premiums, and average seniors should be paying more than they currently pay,” the board stated.
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