Over the last year, COVID-19 has been especially devastating for people of retirement age. As of mid-February, those 65 and over accounted for 81% of the pandemic’s deaths in the United States. More than 373,000 older adults succumbed to the new virus, according to the U.S. Centers for Disease Control and Prevention.
Counterintuitive as it might seem, however, the pandemic could actually put even more pressure on Social Security and Medicare — the two giant, financially challenged federal programs that provide retirement and medical benefits to older and disabled Americans. Workers contribute to these programs through payroll taxes, then draw on their benefits in later life. If thousands die early, shouldn’t that relieve the stress on Medicare’s and Social Security’s budgets?
The short answer is “not much.”
Economists and government actuaries say all those deaths will indeed reduce costs to Social Security for a few years, but, huge as the toll is, it represents only about half of 1% of total beneficiaries. The impact of COVID-19 deaths will likely be more than offset by other trends that will actually hasten the long-predicted day when the Social Security trust fund runs out of money from 2035 to 2034.
The Medicare picture is harder to predict, experts said.
Government experts in 2019 estimated that a trust fund that helps finance Medicare would run out of money in 2026. A recent estimate from the Congressional Budget Office moved that target to 2024.
COVID-19 fueled an increase in emergency hospitalizations, and patients are especially expensive at the end of life. But lockdowns and fear also suppressed spending on elective procedures and doctor visits.
Further, the program helped financially strapped hospitals during the lockdown with loans. Its health will depend to some extent on whether it can collect on those loans.
Scary as that all sounds, Paul Van de Water, a senior fellow with the Center on Budget and Policy Priorities, expects Congress to rescue these crucial programs before they’re forced to cut benefits to core voters.
“The truth of the matter is that Congress never has and never will allow these programs to run out of money,” he said. “No one should lose a moment’s sleep that the pandemic and recession will cause their Medicare and Social Security benefits to stop.”