The Treasury Department’s annual report, issued June 18, on the state of the Social Security and Medicare trust funds projects that the two safety-net programs will run out of enough money to pay current benefits a year earlier than had been projected last year.

The Medicare trust fund will be unable to pay current benefits in full by 2033, the report found. The Social Security trust fund will go into deficit in 2034, according to the report.

The report pegged last year’s law change that expands Social Security benefits to include for the first time certain federal employees as a primary reason for the earlier-arriving shortfall. The report also attributed the acceleration in the projected Social Security shortfall to the likelihood of lower fertility rates and revised economic projections that suggest more sluggish long-term wage growth.

Medicare’s finances worsened, according to the report, because of higher than anticipated expenditures and increased expectations about future spending on hospital and hospice care.

Prospects: These reports are likely to spark more debate on reforming both Social Security and Medicare, but with those programs widely viewed as “the third rail of politics,” significant changes seven to eight years away from “disaster” are unlikely. Still, the reports will keep concern about the financial health of both Social Security and Medicare on lawmakers’ radar for the foreseeable future.

NAIFA Staff Contacts: Diane Boyle – Senior Vice President – Government Relations, at dboyle@naifa.org; or Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org; or Mike Hedge – Senior Director – Government Relations, at mhedge@naifa.org.