By David Lawder
WASHINGTON (Reuters) – Job and revenue losses prompted by the coronavirus will likely accelerate the depletion of Social Security and Medicare reserves, U.S. officials said on Wednesday as they released reports showing little change in the federal benefit programs’ pre-pandemic finances.
The 2020 Social Security and Medicare trustees reports released on Wednesday did not reflect projections from the coronavirus pandemic but showed continued long-term funding shortfalls for retirement, disability and seniors’ healthcare benefits.
Social Security, which pays retirement, survivor and disability benefits, can pay full scheduled benefits until 2035, the same year as projected in last year’s report. Medicare’s Hospital Insurance Trust Fund can pay scheduled in-patient hospital expenses until 2026, also the same as in last year’s report.
Trump administration officials said that while they have made no official projections on the effects of the virus, if a 15% reduction in employment and revenues persists over the full 2020 year, they expect those depletion dates will move forward.
For Social Security, that drop in revenue, assuming a return to normal employment levels in 2021, would move forward the reserves depletion date by six months to mid-2034, the officials said.
A worse-case scenario of a second year of a 15% reduction could push the Social Security depletion into 2033, the officials said.
Medicare, the healthcare program for older Americans, could face both a revenue hit and a significant increase in hospitalization costs, and the reckoning for trust fund depletion could come considerably sooner.
Under a “high-cost” scenario, the Medicare hospital trust fund would be depleted in 2023.
“It is also possible that the experience could be even worse than that,” one of the administration officials told reporters on a conference call. “It truly is too early to say exactly what the impacts are. But you are correct in that they are generally going to be worse than presented under the immediate assumptions.”
Depletion of Social Security and Medicare reserves does not mean that benefits stop altogether, because there is an assumption that tax revenues will continue to be collected. Under the current pre-pandemic projections, continuing tax revenues would allow Social Security to pay 79% of scheduled benefits in 2035 and Medicare could pay 90% of total hospital insurance benefits in 2026.
U.S. Treasury Secretary Steven Mnuchin said in a statement that the programs, which make up the federal government’s two largest expenditures, “remain secure,” but added that the Trump administration was “working around the clock” to mitigate long-term negative economic impacts from the pandemic.
(Reporting by David Lawder; Editing by Andrea Ricci)