Medicare and Social Security Report Highlights Need to Significantly Raise Payroll Taxes
April 26, 2019
The latest Medicare Trustee report showing that the hospital trust fund will be depleted by 2026 means Congress faces tough tax and benefit choices ahead as it considers expanding the program to cover more Americans.
The report finds that:
- Medicare needs a 0.9% payroll tax increase or an immediate 19% cut in benefits for the hospital trust fund to remain solvent. Without the tax and/or benefit changes, in 2026 Medicare Part A would only be able to pay 89% of estimated expenditures.
- Social Security needs a 2.70% payroll tax increase or an immediate and permanent 17% cut in benefits applied to all current and future beneficiaries for the retirement and disability programs to remain solvent. Without the tax and/or benefit changes, Social Security’s retirement trust fund will be depleted in 2034 and the program will only be able to pay 75% of estimated benefits.
Takeaway: Despite all of the focus on expanding Medicare ahead of the 2020 election, Congress will be forced to address the program’s solvency issue much sooner than the public is currently prepared for.