Goldco Precious Metals Blog

Medicare Funding Shortfall Could Make Social Security Look Solvent

Two of the biggest expenditures the federal government makes each year are its largest welfare programs, Social Security and Medicare. The two programs cost the federal government $1.9 trillion in 2020, more than the amount of money taken in through income taxes. But both of those programs are in poor fiscal shape.

The problems with Social Security are well known, and well publicized. The program is expected to last just over a decade before payroll taxes are projected to be insufficient to pay benefits, at which point seniors can expect to receive less than 80% of their expected benefits. But compared to Social Security, Medicare is in far worse shape. In fact, Medicare’s fiscal position is so precarious that it almost makes Social Security look solvent.

Medicare’s Hospital Insurance trust fund is expected to become insolvent in 2026, only 5 years away. After that point, it only pays for 91% of benefits. And that payment will only get smaller each year thereafter. That could have a major impact on your retirement income as you age.

Why Is Medicare So Important?

Nearly 63 million people are enrolled in Medicare today, nearly as many as Social Security. But while not everyone receives a huge amount of money from Social Security, the potential is for Medicare recipients to receive a large amount of benefits due to the nature of healthcare costs.

The way Medicare is structured, with penalties being assessed if you choose not to opt in to the system at age 65, you’re almost forced to join Medicare once you reach retirement age. There’s hardly a senior in the country today who isn’t part of Medicare. So if Medicare isn’t going to be able to pay for medical benefits, that could have a negative effect on your health and your pocketbook.

Who Pays for Healthcare Without Medicare?

The big question that everyone has is, who will pay for medical services if Medicare is unable to? Medicare has essentially become a major subsidy to the healthcare industry, with just about every hospital in the country dependent on Medicare revenue for its continued operation. So if Medicare payments fall, hospitals are going to find it more difficult to operate.

For those seniors who still have health insurance plans, such as federal retirees, their primary insurer may end up paying for their healthcare first, then Medicare. But if Medicare can’t make the payments, who makes up the shortfall? Could it be you, the patient?

Even worse, if Medicare is the only health insurance you have and it can’t pay, will you be on the hook for what it won’t cover? There’s a real possibility that could happen. Or if hospitals don’t want to bill their patients more, they may decide to ratchet back the number of services they offer to their patients in order to minimize costs.

Your options after 2026 may be to choose between paying more for healthcare or being forced to reduce the quality of your healthcare. Neither of those sound appealing.

Are You Prepared for Medicare Insolvency?

Like Social Security, the fiscal position of Medicare will only deteriorate in the future without a fix. As the US population ages, more Americans are going to be drawing on Medicare for their healthcare. And fewer workers are going to be paying payroll taxes to support those Medicare beneficiaries, meaning that the percentage of benefits Medicare will be able to pay will decline each year after 2026.

Congress thus far doesn’t seem to care about the situation. In fact, Democrats in Congress are trying to expand Medicare to include even more benefits, but without raising additional revenue. If they’re successful, they could push Medicare into even worse financial shape.

Medicare is essentially on the verge of a crisis that could determine the very existence of the program in the future. Will Congress get serious about Medicare’s fiscal woes and take steps to shore up the program? Or will it continue kicking the can down the road and allow the program to leave both seniors and healthcare providers in the lurch?

And how are you planning for Medicare’s insolvency? With the very real possibility that a Medicare trust fund depletion could mean higher healthcare costs for you, that could mean that your healthcare expenditures will increase. If you thought you’ve saved enough for retirement, your estimates may now be too low. And that means you may have to adjust your retirement planning to account for Medicare’s bankruptcy.

Medicare, Markets, and Your Retirement

Unfortunately the outlook for the economy and for markets doesn’t look too good for the future. With shortages of labor, parts, and raw materials, companies throughout the country are faced with uncertainty. That means the prospects for future growth aren’t that great.

Stock markets are already beginning to show some signs of wariness about the future, reflected in some pretty big drops over the past couple of weeks. We could very well be on the verge of a stock market correction, or even more ominously, a long-term period of subpar economic growth and stagnant stock market valuations.

With high inflation, high unemployment, and an economy that is struggling to get back to normal, there’s an increasing likelihood that the 2020s could end up just like the 1970s, a decade of stagflation that confounded investors. So if you’re looking to increase your investment gains to make up for Medicare’s shortfall, you’ll have your work cut out for you.

Thankfully, there’s a way to protect your retirement savings while still building wealth into the future. That’s through investing in precious metals like gold and silver.

Gold and Silver Can Help Build Wealth

Gold and silver have a track record of gaining value through times of economic difficulty. During the 1970s they averaged 30% annualized gains over the course of the decade, far outpacing both stock markets and inflation. And over the past 20 years both gold and silver have also handily outperformed stock markets. With high inflation and low economic growth on the horizon, the stage is being set for another significant rise in gold and silver prices.

If you’re looking to boost the value of your retirement savings to help compensate for higher healthcare spending in the future, it may be worth taking a look at investing in gold and silver. Whether you’re interested in investing tax-advantaged retirement assets from a 401(k), IRA, TSP, or similar account into a gold IRA, or just buying gold and silver to store at home, the precious metals experts at Goldco can help guide you through the process.

Don’t wait until it’s too late to build up your retirement savings. With only five years until Medicare is bankrupt, the clock is ticking. Call Goldco today to learn more about how gold and silver can help build your wealth and protect you against rising costs.

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