When Medicare and Social Security Go Broke

Premier Reverse ClosingsMy grandfather was approaching middle age when the U.S. government inaugurated a workers’ safety net known as Social Security. Signed into law on August 14, 1935 by FDR, Social Security was initially intended solely as a retirement benefit for the primary breadwinner. In 1939 the law was amended to include survivor, spousal and children’s benefits; disability benefits were added in 1956.

Was the program necessary, given that people managed without it for generations? It would seem so. From 1937 (when the first payments were made) through 2009, the Social Security program paid out $11.3 trillion.

Show Me The Money

Now, however, it’s in trouble. The Federal government projects Social Security funds will be depleted by 2034, a scant century after the program began.

If this seems a bit far off to contemplate, consider that Medicare, established in 1965 as an amendment to the Social Security program, will be broke by 2026. That’s eight years from now.

This news is a rude awakening for Boomers, just as millions are reaching the age when they can access these resources. Medicare currently provides health insurance for about 60 million people, most of whom are 65 or older.

Good News for the HECM Industry?

While the government description of asset depletion sounds like the end of two enshrined programs on which our nation relies, in reality, it means the trustees will be tapping into the trust fund to pay for Medicare and Social Security — not abolishing them altogether. It does mean checks and reimbursements could be cut significantly.

How do these dire predictions of insolvency affect the reverse mortgage industry? It’s potentially positive news for HECM professionals.

Homeowners with sufficient equity may be that much more amenable to applying for a loan as a smart planning strategy, if they know they can’t count on Medicare and Social Security later on.

Changes In the Works 

There’s hope on the horizon, however. The private sector is taking healthcare into its capable hands. Harvard professor and surgeon Atul Gawande, who authored the bestseller Being Mortal: Medicine And What Matters In the End, has been tapped to head a new Boston-based health venture launching this month.

Funded by the deep pockets of Amazon.com, Berkshire Hathaway, and JP Morgan, the new entity will be an independent effort to help the three companies improve care and reduce costs.

“This work will take time but must be done,” Gawande said in a statement. “The system is broken, and better is possible.”

Smarter Self Care

Finally, seniors should know what health resources they have literally at their fingertips, such as this life-saving cell phone information, courtesy of the Office of Chronic Care Advocacy:

“For iPhone users, the feature is called ‘Medical ID.’ Medical ID allows others to access important medical information about you without unlocking your phone. From the ‘unlock’ screen, a first responder can tap the ‘Emergency’ option in the bottom left corner, then ‘Medical ID,’ and view your name, date of birth, emergency contacts, blood type, height, weight, allergies, medications, and medical conditions — or any other information you wish to include. Quite helpful if someone is unable to communicate.

“For Android phones, a similar feature may be available either as a phone setting or in the form of an ‘ICE: In Case of Emergency’ app. Check for an emergency contact feature in the phone’s settings or consider editing the lock screen to include important information.

“In addition to including personal information, you can use these cell phone features to indicate an advance medical directive in the U.S. Living Will Registry, so medical professionals can access it if needed.”

Whatever transpires on the national level with Medicare and Social Security, creative and forward-thinking health and financial advocates are envisioning a future that works — perhaps better, as Gawande opines, than what we have now.


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