Today, the U.S. Trustees issued reports on Social Security and Medicare. The situation is stark and bleak. According to letters sent to Vice President Mike Pence and Speaker of the House Paul Ryan, Disability Insurance asset reserves will fall below 20% of the costs by 2027 (i.e. 9 years), and be depleted by 2032 (14 years). The combined trusts of the Old-Age and Survivor’s Insurance (OASI) and Disability Insurance Fund are projected to be depleted in 2034 (16 years). The Federal Hospital Insurance Trust Fund is projecting deficits every year until the fund is depleted in 2026. This is three years earlier than was predicted in last year’s report.
Here’s a summary of the Social Security and Medicare Trust Fund Reports.
* OASI or DI Trust Fund assets are projected to drop below 20 percent of annual cost within 10 years.
* Medicare’s Hospital Trust will be depleted in 8 years (3 years earlier than predicted in the last report).
Why is This Happening?
While political parties blame each other for the mess, the truth is that the world changed dramatically since these programs were created.
Baby Boomers are Retiring. 2018-2027 is expected to see a high level of Baby Boomer retirement. By 2030, 1 out of 5 Americans will be retirement age (source: Census Bureau).
People are Living Longer in Retirement. Today the average life span in the U.S. is 78 ½ years, with Canadians living until almost 81. In 1960, life expectancies were 67 years. Then you were lucky to live two years beyond retirement. Today, someone retiring at 65 might live 13 or more golden years beyond their career!
Medical Care Costs Went to the Moon between 1960 and 2008. Between 1960 and 2008, medical costs soared far above GDP growth. Since 2008, medical cost increases have moderated, but are still above economic growth (source: Trustees Report).
The Trustees encourage lawmakers to act now to “increase revenues” (taxes), to reduce costs by modifying benefit levels or eligibility requirements, or to use a combination of methods.
Economists say that the problem is quite simple. As Princeton economist Uwe Reinhardt said in a study 15 years ago, “It’s the prices, stupid.” According to a recent report by Dr. Ashish Jha of the Harvard T.H. Chan School of Public Health, medical costs in the U.S. are astronomical compared to other countries.
Pricing is clearly the biggest reason that our health care costs are out of whack. Anyone who has visited a hospital or doctor recently can tell you that.
While the politicians debate the solutions, there are a few ways that individuals can fix part of the problem. This becomes more evident when we take a peek behind the numbers. For instance, why have medical costs soared? Is it solely due to technology, innovation and inflation? Or are there other factors at play?
5 Fast Facts About Medical Costs in the U.S.
1. The U.S. is spending $3.2 trillion on health care each year. That equates to roughly 18% of our annual GDP, and is the highest in the world.
2. Obesity. More than 1/3 of American adults (36.5%) and 17% of children are obese. The U.S. ranks number 12 as the most obese nation in the world. The good news is that since 2014, there have been declines in obesity among preschool children.
3. Medical Costs Associated with Obesity. Obesity-related conditions include “Heart disease, stroke, type 2 diabetes and certain types of cancer, some of the leading causes of preventable death,” according to the CDC. Obesity costs added $147 billion to the medical bill in 2008. A decade later, the problem is even more pronounced, with more people affected and higher medical costs.
4. Since 2014, obesity rates in low-income preschool children have been declining.
5. The RX: Better Food and More Playing. The term is technically called healthy living, but it basically means that everyone, but especially children, need more access to nutrition-rich food and outdoor play. Click to see 5 bullet points on what the CDC recommends for better health at school, including opening up school gyms and playgrounds after hours for safe play.
While the legislators figure out how to shore up Social Security and Medicare by taxing us more, or reducing benefits and eligibility, we can, as individuals, help the issue by getting healthier. There are many fixes needed to save these programs, including ameliorating the opioid epidemic, making medical care more affordable and finding better solutions for end-of-life costs, which make up at least 11% of all medical costs. You can get some exercise (good for healthy living RX) walking over to your representative’s next town hall to make sure that all of these issues – not just higher taxes and reduced benefits – are in the debate.
If you are concerned about your retirement and want time-proven solutions, call 310-430-2397 or email info @ NataliePace.com. Receive a complimentary private, prosperity coaching session (value $300), when you register for a retreat by June 30, 2018. See below for information on the next two Financial Empowerment Seminars.
Natalie Pace is the co-creator of the Earth Gratitude Project and the author of The Gratitude Game, The ABCs of Money and Put Your Money Where Your Heart Is. She blogs on Huffington Post and Medium, and is a frequent guest contributor to national news shows and magazines. She has been ranked the No. 1 stock picker, above over 830 A-list pundits, by an independent tracking agency, and has been saving homes and nest eggs since 1999.