As a forty-something member of Generation X, and with retirement becoming an ever closer spot on the horizon, is it possible to ignore the consistent (and scary) messages in the media about the rapidly depleting trust funds of both Social Security and Medicare? Will I be able to rely on Social Security and Medicare to supplement my retirement savings?
It’s hard to separate myth from fact; especially in a time where playing on people’s fears seems to make for darn good journalism. We’ve been told that the baby boomers are going to wipe out Social Security and Medicare; or evil politicians have borrowed and squandered the hard earned money of the working American people; and let's not forget about all of those able-bodied folks receiving disability unjustly.
I’m not sure who else the media can blame…but, I’m sure there are others!
As an employee in the Medicare health insurance industry, I do see the value in our Medicare system each and every day. The truth for many Americans is that the amount of money that they have paid into Medicare is somewhat less than the benefits that they will receive. This is due mainly to the higher costs of medical care and the fact that we are living longer.
So, even though working Americans do pay into Social Security and Medicare, these programs were founded in... and are now grounded in, the principle of social insurance. I’ve never heard of another viable solution that provides for the basic human needs of the aging and disabled population and balances the taxes we want to pay with the demand for services.
Fortunately for us, rapid advances in technology revolutionized the medical and pharmaceutical fields. This has greatly increased our longevity. When Social Security and Medicare were signed into law; people weren’t living as long.
Simply put, these programs were meant to supplement the pensions and savings of Americans who were, statistically speaking, living only into their late sixties and early seventies.
Even in today’s environment, many Americans have not adequately saved enough to keep their standard of living in their retirement years, have not been realistic on what their healthcare costs will be (even with Medicare) and will rely on Social Security and Medicare to help pay for basic necessities.
So, going back to my opening question; can I make Social Security and Medicare a part of my retirement plan?
My, ‘see things from the glass half full’ mindset says, “YES!”
Here are my reasons why.
1. Social Security is made up of two funds. The first is for the Old Age & Survivors Insurance (from now on called Social Security) and the other is for Social Security Disability.
Presently, as soon as mid-2016, the disability portion of the reserve fund will be depleted; and while in desperate need of major reform, congress is expected to act quickly to ensure that the almost 11 million at-risk people receiving disability benefits will not get cut off abruptly next year.
Regular social security reserves are expected to be depleted by 2034, and after that, tax income is projected to be able to pay 75% of scheduled benefits until 2089. This is even taking into account that the number of beneficiaries continues to grow at a substantially faster rate than the number of workers paying into the system.
2. Medicare is also split into different funds: Part A (Hospital Insurance) and Part B and D (Doctors, Outpatient Surgical, Medical Equipment and Prescription Drugs). There are currently 53.8 million Medicare beneficiaries with an annual expenditure of $613 billion dollars. This compares to 60 million beneficiaries being paid social security and disability benefits of $859 billion dollars.
Part A, or the hospital fund, is said to have reserves that will last until 2030. The Part B and D portion of the trust fund is adequately funded indefinitely, (theoretically) due to the fact that it is funded through general tax revenues and monthly premiums paid by Medicare beneficiaries.
While substantial growth in Medicare is occurring now through 2030 (to the tune of 10,000 baby boomers a day), creating a substantial financial shortfall, there are measures that have been put into place with the creation of the Affordable Care Act (ACA) in 2010 that are already creating a positive trend in protecting the Medicare Trust Fund.
3. Finally, and where I find a lot of confidence, policy makers would commit political suicide if the focus was on eliminating these programs as opposed to coming together to make the long lasting reforms needed to keep these programs in place for the long haul.
America is built on capitalism, and like it or not, the American Medical Association, the Pharmaceutical and the Insurance industries are some of the biggest lobbyists on Capitol Hill. Billions of dollars annually are funneled to these industries through the Medicare program; and they won’t give that up easily. It makes good financial sense for them to keep these programs solvent.
Social Security and Medicare "scare media' is more about political fodder than anything else; meant to divide people with political theology. After reading the 2015 report on these funds, I've come to my own personal conclusion that, while there are great challenges facing these systems today...there are also many creative solutions being proposed to help keep both funds solvent for years and years to come.
So, happy 50th (1965) birthday Medicare! Happy 80th (1935) birthday Social Security!
And I say...many more!
To read a full summary of the 2015 State of Social Security and Medicare, visit: http://www.ssa.gov/oact/trsum/