Social Security and Medicare

Chapter 8The Future of Social Security and Medicare

Learning objectives

• Identify conventional wisdom on the future of Social Security and Medicare.
• Recognize official Social Security and Medicare concerns based on reports.
• Recall the effect of longer lifespans on the predicted shortfall in the Medicare system.
• Recognize the effect that the rules under the Patient Protection and Affordable Care Act (Affordable Care Act or ACA) have on Medicare costs.

Overview

When Social Security was established in 1935, a person who had attained age 65 had a 12-year life expectancy. Today, the average 65-year-old has a life expectancy of 20 years, according to the National Center for Health Statistics.

In 1950, 16.5 workers paid in retirement benefits for each retiree. According to reports from the Social Security Administration (SSA), in the year 2030, the ratio will be approaching only two workers paying in retirement benefits for each retiree. By then, the burden of taxes on each worker may well be unmanageable.

This section will examine what is occurring in both Social Security and Medicare trust funds and explore ways to address expected and worrisome shortfalls.

The system is strained

Social Security and Medicare (along with subsidies for the Affordable Care Act) are the two largest federal programs, accounting for 50% of federal expenditures in fiscal year 2017. Social Security spending accounted for 23%, and Medicare and ACA subsidies accounted for 27% of the spending. Both programs ...