Social Security and Medicare Board of Trustees Release Annual Trust Fund Reports

Action: On June 9, the Boards of Trustees of the Social Security and Medicare Trust Funds released their annual actuarial reports on the programs’ projected financial status, showing the primary Trust Funds for Social Security and Medicare are projected to become insolvent by 2032 and 2033, respectively -- both one quarter earlier than projected last year.¹

Trusted Insights for What’s Ahead^®

• Under the intermediate estimates, the Old-Age and Survivors Insurance (OASI) Trust Fund that pays for Social Security retirement benefits will be able to pay 100% of total scheduled benefits until the fourth quarter of 2032, one quarter earlier than projected last year. At that time, the fund’s reserves will become depleted and continuing program income will be sufficient to pay 78% of total scheduled benefits.
• Medicare’s Hospital Insurance (HI) Trust Fund will be able to pay 100% of total scheduled benefits until the second quarter of 2033, one quarter earlier than projected last year. At that point, the fund’s reserves will become depleted and continuing program income will be sufficient to pay 89% of total scheduled Medicare Part A benefits.
• The projected finances for the OASI and HI Trust Funds worsened compared to last year’s estimates because of changing assumptions on labor as well as lower tax rates and new tax breaks for individuals over age 65 in the One Big Beautiful Bill Act (OBBBA) that lowered program revenue from income taxation of Social Security benefits.
• While Medicare’s Supplementary Medical Insurance (SMI) Trust Fund for Medicare Part B and D benefits is adequately financed because beneficiary premiums and Federal contributions from the Treasury are automatically adjusted to meet annual costs, the Boards of Trustees remain concerned about rapidly rising SMI expenditures because of higher prescription drug costs and increased utilization of recently-approved specialty drugs.
• What this means for business: The annual reports reveal the continued challenges of financing Social Security and Medicare and ideally putting greater political pressure on Congress to act.
  • Without urgent reforms, beneficiaries face a 22% cut to Social Security retirement benefits in 2032 and an 11% cut to Medicare Part A benefits in 2033. Conversely, Congress may be forced to backfill the Trust Funds with General Fund money to keep beneficiaries whole, worsening the debt crisis.
  • The impending insolvency of these funds also increases the burden on employers, private health insurance, and private retirement accounts to compensate for potential lost Federal support for the retirement income and health care needs of older Americans.
  • Congress can consider the following reforms:
    • Save Social Security to avoid short-term insolvency and establish long-term fiscal sustainability through a combination of benefit adjustments (including modest means testing and gradually raising the retirement age), revenue raisers, and possibly diversifying Trust Fund investments.
    • Modernize Medicare and other major Federal health programs through innovative strategies, including value-based care and alternative payment models; reforms to Medicare Advantage; adjustments to premiums, cost-sharing, and prescription drug payments; emphasizing primary care and care coordination; and streamlining regulations.