The federal government just released its annual reports on the stability and solvency of Social Security and Medicare, and there’s both good and bad news.
The bad news is that one of the trust funds underlying the programs is set to run out of money sooner than previously expected — only a decade from now. The good news is that two other trust funds will last longer than previously expected.
Following is a quick look at the status of the trust funds for Social Security and Medicare, along with what you can expect to receive after each runs out of money.
Social Security’s retirement trust fund
Trust fund name: Old-Age and Survivors Insurance (OASI)
When its reserves are now projected to be depleted: 2033 (which is one year sooner than projected in 2022)
What happens when its reserves are depleted: Incoming funds will be enough to pay for 77% of all scheduled benefits. At least theoretically, this means someone who receives, say, $1,000 per month in Social Security retirement benefits would instead receive only $770 per month starting in 2033.
The OASI trust fund is what provides monthly benefits to retired workers, their families and their surviving spouses — what we traditionally think of as Social Security. It is funded by the FICA taxes, aka payroll taxes, that Americans pay during their working years.
Social Security’s disability trust fund
Trust fund name: Disability Insurance (DI)
When its reserves are now projected to be depleted: 2097 (which is one year later than projected in 2022)
What happens when its reserves are depleted: N/A
The DI trust fund provides monthly benefits to disabled workers and their families. Like the OASI trust fund, it’s funded by payroll taxes.
The federal government believes this fund will last until the end of its current 75-year projections.
Medicare’s hospital trust fund
Trust fund name: Hospital Insurance (HI)
When its reserves are now projected to be depleted: 2031 (which is three years later than projected in 2022)
What happens when its reserves are depleted: Incoming funds will be enough to pay for 89% of all scheduled benefits
The HI trust fund is for Medicare Part A, which helps pay for inpatient hospital services, hospice care and skilled nursing facilities. It is funded by payroll taxes and income taxes on Social Security benefits, as well as Medicare premiums.
Medicare’s medical trust fund
Trust fund name: Supplementary Medical Insurance (SMI)
When its reserves are now projected to be depleted: Beyond current projections (which is essentially the same as projected in 2022)
What happens when its reserves are depleted: N/A
The SMI trust fund is for Medicare Parts B and D. Part B helps pay for physician and outpatient hospital services, while Part D helps with prescription drugs.
This year’s trust fund report says SMI is “adequately financed into the indefinite future because, unlike the other trust funds, its main financing sources — premiums on enrolled beneficiaries and federal contributions from the Treasury — are automatically adjusted each year to cover costs for the upcoming year.”