Social Security and Medicare Trust Funds: A Looming Crisis
The Social Security retirement and Medicare Hospital Insurance trust funds are approaching insolvency, with depletion expected in just seven years.
Without action, significant cuts are looming: a 24 percent benefit cut for retirees in 2032 and a 12 percent cut in Medicare hospital payments.
Restoring Solvency
Restoring solvency will require a combination of slowing benefit growth, lowering healthcare costs, and increasing revenue.
Current Financing
The trust funds are primarily financed by a 15.3 percent payroll tax, split between workers and employers, with a 12.4 percent Social Security tax applied to the first $176,100 of annual wages in 2025.
A New Proposal
A new alternative suggests replacing the employer side of the payroll tax with a flat Employer Compensation Tax (ECT) on all employer compensation costs.
Proposals to boost revenue often involve increasing the tax rate or the tax cap.
Author's summary: The Social Security and Medicare trust funds face insolvency.