Social Security payments could see steep cuts starting in 2033
The head actuaries for Social Security and Medicare testified before a House panel on Thursday about the two safety net programs’ looming financial woes that could see key trust funds depleted in roughly a decade, which would leave beneficiaries facing a benefit cut if the funding gap isn’t resolved by Congress.
Trustees for Social Security and Medicare recently released a report that looked at the health of the key trust funds which found that the funds are on pace to be depleted in roughly a decade. When that happens, those programs would only be able to pay out what they receive through incoming payroll tax receipts, meaning benefits would be automatically cut under current law.
Social Security’s Old-Age and Survivors Insurance (OASI) trust fund is expected to be depleted in 2033, when just 79% of scheduled benefits would be payable. When merged with the Disability Insurance (DI) fund, the date shifts to 2035 with 83% of benefits payable. Based on the $1,907 average monthly benefit as of January 2024, that 17% cut would leave beneficiaries with a $1,582 check — $325 less per month and $3,900 less on an annual basis.
The Medicare Health Insurance (HI) trust fund, which covers hospital and care after hospital stays, is projected to be depleted in 2036 when 89% of benefits would be payable. Though the Medicare HI depletion date was five years later than a year ago, the Social Security OASI date was unchanged.
Stephen Goss, chief actuary for the Social Security Administration, noted that members of Congress from both sides of the aisle have proposed a wide variety of policies aimed at reforming the two programs to shore up their finances — giving policymakers a menu of options to consider going forward.
“Because of many, many members of Congress putting forth proposals for affecting Social Security, we have a large list of provisions and proposals up on our website to sort of look at and choose from,” Goss said. “A commission that would look through all of those possibilities and come to a consensus would be a really good thing.”
Paul Spitalnic, chief actuary for the Centers for Medicare and Medicaid Services, added that the sooner Congress makes reforms to the two programs, the less dramatic those changes will need to be to put the programs on a sound financial footing.
“So the earlier, certainly the better,” Spitalnic said.
House Budget Committee Chairman Jodey Arrington (R-Texas) said in his opening remarks that “60 million-plus people” are counting on Social Security and Medicare today, while another 10,000 per day are becoming eligible for the programs.
“My prayer is we unite — not as Republicans, not as Democrats, but as Americans,” Arrington said. “I won’t get everything I want to solve it probably, they probably won’t get everything they want, but we must do it or there will be an automatic cut.”
He noted that the committee passed a bill that would create a bipartisan fiscal commission with lawmakers from both parties who would seek to come to a consensus on policies to stabilize the nation’s finances, including the looming issues with Social Security and Medicare. The bill is yet to be considered by the full House of Representatives.
In his opening remarks, Ranking Member Brendan Boyle (D-Pa.) noted that there are stark partisan differences between Democrats and Republicans when it comes to addressing reforms to safety net programs, but that he believes Congress ultimately must act to ensure full benefits continue into the future.
“I believe deeply in Social Security and Medicare and what they represent even beyond the paychecks, what they say to the American people is that we have a basic commitment to all of those who are in our society that we are going to take care of you when you need it,” Boyle said.
“We have until 2035 for the combined Social Security and Disability Insurance Trust Funds, as well as 2036 for Medicare, but ultimately Congress must ensure that these programs have the resources to continue paying full benefits,” he added.
