Social Security and Medicare's insolvency dates don't matter. Insolvency does

To no one’s surprise, the newly released 2026 Social Security and Medicare trustees reports paint a dire picture. Social Security’s combined trust funds are still headed toward insolvency, as is the only Medicare trust fund that can even become insolvent. That may be why so many headlines focus on projections of exactly when the doomsdays will arrive: 2032 for Social Security’s Old-Age and Survivor (OASI) Trust Fund and 2033 for Medicare’s Hospital Insurance (HI) trust fund.

These dates aren’t what matters.

If you go to an annual checkup and learn you have a potentially terminal disease, what matters for the moment isn’t whether your doctor expects you to live until 2032 or 2033. You don’t sit back and hope that next year, she’ll revise the guess to 2034. Right now, what matters is finding a cure and getting treatment underway. And that’s where the news for Social Security and Medicare is bleakest.

Social Security’s shortfall could have been easily eliminated many years ago with a simple, modest tweak to the statutory formula that automatically increases benefits each year. Lawmakers, afraid of the politics of a "cut," procrastinated. Now, the substantive problem is much bigger, and thus the political obstacles as well.

The gap is now so large that Social Security can no longer be realistically cured by cost containment alone, tax increases alone, or eligibility age adjustments alone. To fix the problem solely by increasing payroll taxes, the current 12.4% Social Security tax rate would need to rise overnight to 16.65% — something even the most left-leaning Congress wouldn’t do. Even the most fiscally conservative Congress would not cut benefits for all new claimants by the necessary 30% across the board. Chopping these measures down to tolerable, politically realistic sizes requires blending them with each other and with eligibility age adjustments.

Postponing treatment is almost always worse. If lawmakers wait until near the projected depletion date of Social Security’s combined trust funds (2034), even cutting off all new benefit claims entirely will not avert insolvency.

It’s important not to become numb to these facts. At stake is nothing less than whether Social Security can remain a reliable source of benefits. There’s a reason why it currently enjoys political support that welfare programs lack.

We finance welfare programs out of the general fund with our income taxes (which not everyone pays), while eligibility is a function of need. Taxpayers and welfare beneficiaries represent competing interests, so there is a continual renegotiation. From one Congress to the next, we keep changing welfare benefit rules: who’s eligible, what they need to do to collect, and what those benefits will be. And so, you’d be foolish to make long-term income plans around welfare benefits.

By contrast, people can and do make long-term income plans around their expected Social Security benefits, because these are tied to what participating workers contributed. That’s why politicians can’t arbitrarily take them away. But the structure only works as long as benefit formulas align with what payroll taxes can fund. Under current law, they don’t.

If lawmakers don’t fix that soon, we can’t have this kind of Social Security system anymore. It would become just another program competing for funding in the general budget each year. Benefits would be disconnected from participant contributions and become much less predictable.

Medicare is in the same boat with Social Security in that Hospital Insurance will go insolvent unless lawmakers either reduce its costs (by 12%) or increase its tax collections. But its largest trust fund (Supplementary Medical Insurance, or SMI), which is growing even faster than HI, poses an additional problem.

Solvency is meaningless for Medicare SMI. SMI is automatically given whatever revenues it needs, charging higher premiums on participants and receiving increased funding from the general treasury. This is why Medicare is the single biggest driver of skyrocketing federal deficits.

There’s one piece of good news in these reports from a governance perspective: They continue to be valuable, credible information sources. The worsening picture is an honest one. The current trustees have responsibly recognized that U.S. birthrates have declined, which means fewer future workers paying taxes to support these programs. This was already happening, and the sitting trustees deserve credit for recognizing it.

The annual trustees’ reports should serve as a wake-up call, and louder than the last. Swift and decisive measures are necessary to preserve Social Security and Medicare in the forms we Americans know, rely on, and support.

Charles Blahous is the J. Fish and Lillian F. Smith chair and senior research strategist at the Mercatus Center at George Mason University. He served as a public trustee for Social Security and Medicare from 2010 through 2015.