July 2020

Medical Care During Pandemic

Social Security’s benefits are largely paid from 3 large trust funds administered by the Social Security Administration.

Social Security’s benefits are largely paid from 3 large trust funds administered by the Social Security Administration. These trusts are funded by payroll taxes paid by workers and employers each pay period. There are three funds – one which pays retirement and survivor benefits; one which pays for disability insurance benefits; and, one that funds Medicare.

Being dependent upon payrolls makes these trust funds subject to severe economic swings such as recessions and pandemic-related unemployment. The loss of millions of jobs will have some impact upon the trust funds in future years.

However, first some optimistic news. Just before the pandemic impact the Social Security Trustees issued their annual report on the solvency of the trust funds and their ability to pay future benefits.

At of the time of the report, the Retirement trust fund would be able to fund 100% of projected benefits through 2034. At that time, assuming no legislative changes, the fund would still be able to pay 76% of benefits owed. This was unchanged from the prior year.

However, the Disability trust fund is now projected to be fully solvent until 2065, an increase of 13 years from last year’s report. Still assuming no legislative changes, at that time 92% of benefits would still be funded.

The Hospital Insurance fund (Part A of Medicare) is only solvent through 2026 and after that only 90% of benefits could be funded. This was unchanged from the prior year.

These projections are based upon current legislation, projected fertility rates, and other demographic and economic projections.

The increased viability of the Disability trust fund is attributed to fewer applications being filed since 2010 and fewer beneficiaries. Advocates for the disabled will add that stricter interpretations of the Act have led to many totally disabled claimants being denied this assistance. However, legislation and the pandemic shutdowns are going to impact the viability of the trust funds going forward.

The Care Act allows employers to defer paying the FICA payments to the Trust Funds. While eventually they will be paid, in some instances the deferral will last through 2022. The modification to the Affordable Care Act, which eliminated the penalties for gold standard health insurance plans, also decreased payments into the trust funds. Obviously, high unemployment rates for much of 2020 will decrease payments into the funds as there are just fewer people working.

Ultimately Congress is going to have to act to increase the long-term viability of the Trust Funds. According to the Trustees’ report 54.1 million Americans receive benefits from the retirement and survivors trust fund. Another 9.9 million receive benefits from the disability trust fund and more than 62 million receive Medicare benefits.

There are ideas pending in Congress. It is important that each of us communicates to our representatives and Senators the importance of protecting and enhancing these benefits which are so vital to tens of millions of Americans.

How Can We Help You?

To learn more about Social Security disability issues, and to discuss Social Security generally, call or email us to arrange for an in-service presentation.

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