Many of us think of Social Security and Medicare as essential components of our retirement plans. We may plan for slight changes in economic conditions, but we expect some sort of support. What we don’t plan for is what we would do if Medicare or Social Security ever ran out of funds. It may happen sooner than you think. If you’re retired or planning to retire within the next ten years, you need to know that both Medicare and Social Security funds are running dangerously low. Experts project that Medicare will run out as early as 2024, and Social Security by 2035. Current health trends also have an affect on these resources. Let’s look at some of the most recent trends that will affect the future of Medicare and Social Security.
Health Trends Affecting Medicare
A 2015 report from the National Academy of Sciences found that the death rate is rising for middle-aged white Americans. The researchers cited “drug and alcohol poisonings, suicide, and chronic liver diseases and cirrhosis” as contributors. Alarming? Of course! And here’s the real kicker: the study found a parallel rise in midlife morbidity, or the rate of sickness in those considered middle age. Participants reported an inability to conduct activities of daily living. They noted increases in chronic pain and an inability to work. The researchers found deterioration in liver function in many participants, which indicates high levels of stress.
Yet, despite the grim prognosis, there is good news. The study only found an increase in mortality in middle-age white Americans. Black non-Hispanics and Hispanics at midlife (and those aged 65 and above in every group), saw a fall in mortality rates. The problem is, white Americans make up about 77% of the population. That means the increase in chronic pain, mortality, and inability to perform daily activities can and will put significant strain on Medicare funds. It could mean that Medicare runs out even sooner than 2024. For a nation with a growing aging population relying on Medicare’s support, it’s a sobering finding.
What Happens When They Run Out?
Several trust funds support Social Security and Medicare, so if the main sources run out it doesn’t mean all benefits will stop. According to trustees for the nation’s Medicare program, at the current tax rate, Medicare would be able to pay approximately 86% of costs in 2030. That percentage would decline to 80% by 2050. As for Social Security, trustees projected an inability to pay full disability benefits by 2016.
What You Can Do
With funds running low, we have two options. One option is to continue down the path of paying a decreasing percentage of health benefits (or even cut certain benefits entirely). The other is to analyze each program and reform to maximize efficiency. Make sure you take a good look at your favorite presidential candidate and their stance on which option is best and how their reform strategy might work. The right decision will make a huge difference for older Americans and those planning for retirement.
What are your thoughts on current health trends, Medicare reform, or Social Security reform? Share your thoughts below!