Social Security and Medicare Trust Fund Deficit Concern Background

The Social Security and Medicare Trust Fund Deficit issue is an ongoing complex problem for the Federal Government and for the U.S. Public. The Components of Trust Funds Income and Outgo (n.d.) lists the Trust Funds’ components as the following: 1.) Employment Taxes (i.e., taxable wages income tax), 2.) Expenditures (a.k.a., outgo/expenses), 2.) Surpluses (i.e., positive balances), 3.) Deficits (i.e., negative balances), and 4.) Asset Reserves (i.e., surpluses — deficits)).

For decades, the projected or forecasted future Social Security and Medicare Trust Funds deficit problem has been getting national attention from the United States (U.S.) Federal Government and the U.S. Public due to factors such as rising costs of benefits and expenditures. The Social Security & Medicare Tax Data (n.d.) Web Article states that the Social Security and Medicare’s Hospital Insurance program (a.k.a., Social Security’s Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI) Trust Fund, and Medicare’s Hospital Insurance (HI) Trust Fund) is mainly funded by employee and employer income tax wages (i.e., FICA and SECA initial estimated basis then adjusted to include the actual data). (2019), describes Medicare costs at a glance: Medicare Part A (Hospital Insurance) costs, Medicare Part B (Medical Insurance) costs, Medicare Part C (Medicare Advantage), and Medicare Part D (Medicare prescription drug coverage). The Contribution and Benefit Base (n.d.) Web Article states that the OASDI program’s annual limit for employers’ and employees’ earnings taxation for contribution and benefit (i.e., benefits computations) base or taxable maximum is set annually by a statute. The maximum limit statue amount is subject to change annually based on the National Average Wage Index. The OASDI tax rate is 6.2% for employers and employees and 12.4% for self-employed employment income tax. After 1993, there has been no HI annual maximum limit statute for taxable earnings for employers and employees. The HI tax rate is 1.45% for employers and employees and 2.90% self-employed employment income tax. The following demonstrates how the taxable income contribution and benefit base or maximum limit has risen between 1959–2019:

1959–65 Maximum Tax Limit $4,800 2016 Maximum Tax Limit $118,500 2017 Maximum Tax Limit $127,200 2018 Maximum Tax Limit $128,400 2019 Maximum Tax Limit $132,900

A summary of the 2018 Annual Reports, Social Security and Medicare Boards of Trustees (n.d.) provided a summary message to the public about the economic state of the Social Security and Medicare Trust Funds. In the 2017 fiscal year the Trust Funds equaled 42% of the Federal program expenditures and the cost growth is expected to rise in the mid 2030’s due to generational changes in the population such as the aging baby boomer generation population “entering retirement” and the lower-birth-rates generation population “entering employment” (para. 3). The law makers are working on long term financing shortfalls to provide a broad range of solutions which an expedited solution will be a better solution for vulnerable populations such as people that are dependent on benefits and those who earn lower incomes.

According to ASPE (2005), the 2005 Social Security and Medicare Trust Fund Annual Trustees Report stated that the Social Security and Medicare Trust Fund deficit effects the budget from an economics perspective. For example, in 2005 government receipts equal 17% of the gross domestic product, GDP, and expenditures equal 20% of the GDP which the two programs absorb 7% of the GDP and expenditures are forecasted (5% less than or exceeding over the 75 year estimation time) to grow to 13% by 2030 and 15.5% by 2050. If a long-term solution is not met, the growing rates of consumption would equal about 80% of expenditures and most of the government’s receipts would be consumed by 2050. Also, from a Trust Fund perspective or budgetary perspective, the reserves for both programs are the following:

  • The Social Security projected or forecasted reserves will pay in full until 2014 and its income will account for 14% of the average deficit for 75 years.
  • The Medicare Hospital Insurance, HI, projected or forecasted reserves will pay in full until 2020 and its income will account for 91% of the average deficit for 75 years. Also, Medicare Supplementary Medical Insurance, SMI, expenditures are paid in full each year by the Treasury’s general fund finances which 3/4 of SMI’s income is derived from enrollee premiums.

The 2005 Trustees Report also stated that it appears that a fix for the program’s short falls would be to immediately raise the payroll tax rate from 15.3 percent to 20.31 percent (i.e., raise FICA payment rates) or equally reduce program expenditures, which program endangerment could start in 2020. The combined income tax rate average for the programs would be a 33% increase or a 22% combined average benefit reduction.

The Holden PLLC (2018) online Article reported on October 30, 2018 that Social Security benefits increased 2.18% in 2019 for specific higher income brackets and basic Medicare Part B premium increased to $135.50 in 2019 for specific higher income brackets.

June 5, 2019 Update: I have noticed that there are various multimedia Data Analytics accessibility available on the Internet such as the My Social Security Website and the recently published Article When Social Security Runs Out: What the Program Will Look Like in 2035.


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Originally published at on June 6, 2019.