This story has been updated.
The trust fund that pays Medicare’s hospital expenses will run out of money in 2029, a year later than the most recent projection, according to a federal report. The Social Security program will remain solvent until 2034, a projection unchanged from last year.
The annual report from the Social Security and Medicare board of trustees provides a snapshot of the long-term solvency of the federal government’s two biggest entitlement programs. It comes as Republican lawmakers have introduced a new version of a health care bill that would make deep, long-term cuts to a different entitlement program, Medicaid.
Together, Medicare and Social Security comprised 42 percent of federal program spending in 2016. Medicare covered 56.8 million beneficiaries in 2016 and Social Security provided benefits for 60.9 million people.
The trustees include representatives of the Treasury Department, Health and Human Services, Labor and Social Security. They noted that the growth in national health spending in the U.S. has slowed in recent years.
But they said it was unclear how much of that reflected the temporary effects of the economic downturn, as opposed to systemic changes in how health care is being used and paid for that could result in savings in years to come.
The slowdown in growth helped keep the Medicare program solvent for an additional year longer than the last projection and helped avoid activating the Independent Payment Advisory Board, a 15-member board that is tasked with proposing Medicare cuts if spending grows faster than a target rate.
“The trajectory is still alarming. That is why the trustees issue the warning that we do — the same warning that has been issued for years now — that Congress must act to ensure the long-term fiscal viability, sustainability and survival of Medicare and Social Security,” said Health and Human Services secretary Tom Price. He said that the report is based on assumptions that reflect current law and that it does not factor in the possible repeal of the Affordable Care Act.
“We haven’t calculated that yet,” Treasury Secretary Steven Mnuchin added. “But I hope that’s in next year’s report.”
The trustees said that both Medicare and Social Security face long-term challenges. They exhorted lawmakers to act soon to implement new policies to shore up the programs, while there is still time for the public — particularly vulnerable populations — to prepare.
The disability insurance trust fund, part of the Social Security program, was projected to last until 2028. That’s five years longer than last year’s projection, due to fewer-than-expected people joining the program. Applications for disability benefits have been declining since 2010.
Mnuchin stressed that the key to assuring the solvency of the trusts –and the first priority for President Trump — was growing the economy.
“A combination of an aging population and tepid economic growth has produced the projected short-falls for both Social Security and Medicare,” Mnuchin said, citing the importance of tax and regulatory reform in spurring economic growth that will help stabilize the programs’ finances.
“Persistent and strong economic growth can help bring these programs to sustainable solvency,” he added.
Labor Secretary Alexander Acosta pointed out that in 1960 there were five workers for every Social Security recipient. By 2035, there will be only two workers for every beneficiary.
“By helping more Americans enter the workforce, and then also continue to work as long as they choose, we can increase the amount of growth and possibly impact the long-term fiscal health of the trust funds,” Acosta said.
The report comes as Senate Republicans have put forth a health care bill that has been criticized for its cuts to a different entitlement program, Medicaid, the health care plan for the poor. Some health policy experts have argued those cuts could increase Medicare spending, if older adults lose health care coverage and forego care until they are 65.
“Reductions in coverage could have unanticipated spillover effects for Medicare in the form of higher premiums and cost sharing, if pre-65 adults need more services when they age on to Medicare as a result of being uninsured beforehand,” a Kaiser Family Foundation brief said.