Bipartisan Lawmakers Urge Action to Avert Social Security, Medicare Insolvency

During a recent hearing before the House Budget Committee on June 13, the chief actuaries of the Centers for Medicare and Medicaid Services and the Social Security Administration testified that both programs are projected to become insolvent within the next decade. The growing number of retirees, with around 10,000 entering the Social Security program daily due to the baby boomer retirement wave, is placing unprecedented strain on the system. Chairman Jodey Arrington (R-Texas) emphasized the urgent need for action, warning that without Congressional intervention, Social Security could face insolvency by 2033, followed by Medicaid in 2035.

Stephen Goss, Chief Actuary for the Social Security Administration, presented a bleak outlook for the program, noting that the Old Age, Survivors, and Disability Insurance (OASDI) trust fund reserves are projected to run out by 2035, resulting in only 83 percent of scheduled benefits being payable.

The hearing also highlighted the impending imbalance between workers and beneficiaries, with the ratio expected to reach a critical 2:1. This shift underscores the growing financial burden on the working population to support retirees, exacerbating the fiscal challenges of the program.

Mr. Goss referenced the successful bipartisan reforms implemented by the 1982 Greenspan Commission to address Social Security’s solvency issues in historical context. However, he stressed that the current economic and demographic conditions necessitate new solutions for long-term sustainability.

Furthermore, the hearing addressed the financial outlook of Medicare. Paul Spitalnic, Chief Actuary for the Centers for Medicare and Medicaid Services, reported that Medicare expenditures surpassed $1 trillion in 2023, with assets decreasing by $12.4 billion. He cautioned that the Hospital Insurance (HI) Trust Fund is on a path to depletion by 2036.

During the hearing, Mr. Arrington posed a question to the Social Security Administration actuary about the consequences of inaction: “There’s going to be a point at which we’re not able to pay beneficiaries the full amount. How much will they take in an automatic cut?”

Mr. Goss responded, stating that without changes, the program would only be able to pay 83 percent of benefits by 2035, indicating a likely 17 percent reduction.

In addition to the rising number of beneficiaries, the Medicare representative pointed out that healthcare costs are increasing at a faster rate than inflation.

Both Republicans and Democrats on the panel advocated for changes to the plan, with Republicans proposing an increase in the eligibility age and Democrats pushing for a higher income cap for contributions to the funds.

According to Mr. Goss, an individual earning $50,000 annually would contribute 12.4 percent of their income to the program, split equally between themselves and their employer. In contrast, someone making $400,000 would only contribute 5.2 percent of their income, again evenly divided between personal and employer contributions. These figures support the Democratic proposal to remove the payroll tax cap on high earners to address long-term deficits.

The chairman, who has advocated for cutbacks to ensure program solvency, emphasized that political maneuvering has hindered progress on Social Security issues.

Mr. Arrington pointed out that many lawmakers have been reluctant to address Social Security and Medicare due to potential negative campaign implications, stating, “Somebody’s going to send out a mailer that shows you all throwing grandmother off the cliff.”

He encouraged his colleagues to set aside political considerations and work together to find solutions to the program’s challenges, stating, “This is how this town keeps us from being the kind of leaders that our nation needs now more than ever. So my prayer is we unite, not as Republicans, not as Democrats, but as Americans.”