US Social Security, Medicare to face depletion by 2033, trustees urge swift action

The Social Security and Medicare trust funds are projected to face serious shortfalls sooner than previously expected, according to the 2025 Trustees Reports released on June 18 by the US Department of the Treasury.

The Old-Age and Survivors Insurance (OASI) Trust Fund, which supports retirement benefits, is now projected to be depleted by 2033, unchanged from last year. At that point, only 77 per cent of scheduled benefits would be payable using ongoing revenue.

When combined with the Disability Insurance (DI) Trust Fund, which is solvent through at least 2099, the merged Social Security funds (OASDI) are projected to run dry by 2034, one year earlier than previously estimated.

The Hospital Insurance (HI) Trust Fund that finances Medicare Part A is also on track to exhaust its reserves by 2033, three years sooner than last year’s projection. When that occurs, only 89 per cent of scheduled Medicare hospital benefits can be paid.

Why did the outlook worsen?

Several changes contributed to the accelerated depletion of these trust funds. The most impactful was the Social Security Fairness Act, enacted in January 2025. The law repealed the Windfall Elimination Provision and Government Pension Offset, thereby increasing benefits for certain public-sector retirees. This single policy move significantly added to the projected benefit obligations.

Additionally, the report revised key economic assumptions. It extended the expected recovery period for fertility rates by 10 years, now anticipating a stable rate by 2050 rather than 2040.

They also reduced the share of GDP expected to go toward worker wages, which means lower payroll tax revenue for the trust funds over time.

Medicare’s deteriorating outlook stems from higher-than-expected spending in 2024, particularly in inpatient and hospice services. It also boosted cost projections for early years of the forecast window, increasing the overall burden on Medicare’s HI trust fund.

Congress under pressure

The report emphasised the urgent need for legislative action, warning that delays could limit policy options and force harsher outcomes.

“Social Security and Medicare are vital programs that support tens of millions of Americans,” said Treasury Secretary Scott Bessent. “This data underscores the need for lawmakers to take action to support the long-term viability of these programmes.”

Social Security Commissioner Frank Bisignano added that maintaining benefits for the 185 million workers paying into the system and the 70 million receiving them in 2025 is a top priority for the Trump administration.

Lawmakers have several levers at their disposal, including increasing payroll tax rates, adjusting benefit formulas, or changing the retirement age. However, gridlock remains likely in the short term.

Political stakes and future uncertainty

The report’s findings are already becoming a political flashpoint. Secretary of Labor Lori Chavez-DeRemer emphasised President Trump’s focus on cutting waste, fraud, and abuse to restore trust in these programmes.

HHS Secretary Robert F. Kennedy Jr tied Medicare’s cost pressures to broader health system inefficiencies and promoted the administration’s “Make America Healthy Again” agenda.

CMS Administrator Dr Mehmet Oz said the agency has blocked over $100 million in suspected fraudulent Medicare payments in recent months as part of broader efforts to reduce misuse and inefficiencies.

Still, uncertainty looms. The report’s projections don’t account for new tax policies or major demographic shifts from immigration enforcement—both of which could further affect the financial health of Social Security and Medicare.

If no changes are made, beneficiaries would still receive cheques after the depletion dates, but the payments would be significantly reduced by 23 per cent for Social Security, and Medicare hospital benefits will be cut by 11 per cent.

Nancy Altman, president of Social Security Works, told The Washington Post, “Congress will act. The depletion date is really an action-forcing event.” But with trust fund exhaustion looming just a decade away, advocates warn that the window to act without disruption is closing fast.