President Joe Biden speaks during an event to discuss Social Security and Medicare held at the University of Tampa on February 9.

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CNN  — 

Both sides are misleading people.

President Joe Biden is accusing Republicans of wanting to cut Social Security and Medicare. He says he’ll protect these key pillars of the social safety net.

Republicans, while they do want cuts to deal with “runaway” Washington spending, have promised they won’t touch Social Security and Medicare (or defense spending).

Biden’s promise – focused on Florida Sen. Rick Scott’s fanciful proposal to require federal laws, including those safety net programs, to expire after five years if they are not renewed by Congress – seems completely political.

Republicans’ promise to make cuts without touching the safety net or the Pentagon seems mathematically impossible.

Medicare hospital insurance is already running out of money

The cold, hard, actuarial truth is that we don’t need Scott’s plan to force a debate over Medicare funding, because within five years, the trust fund that funds Medicare hospital coverage (Medicare Part A) will have a zero balance.

That’s right. In their annual report, released last June, Medicare’s trustees reported that the hospital insurance trust fund will bring in $412.6 billion in 2023. It will spend $415.6 billion. That means it will spend $3 billion more than it generates in revenue this year.

The hospital insurance trust fund will be completely gone by 2028, which means the government has five years to change the equation. Read the Medicare trustees report.

An ever-so-slightly more optimistic view from the Congressional Budget Office is that the hospital insurance trust fund will be depleted by 2030.

What happens if the trust fund is depleted?

Here’s what the trustees say: “If assets were depleted, Medicare could pay health plans and providers of Part A services only to the extent allowed by ongoing tax revenues—and these revenues would be inadequate to fully cover costs. Beneficiary access to health care services could rapidly be curtailed.”

That’s short on specifics, but it’s clear Medicare is warning that without the trust fund, some services would be cut quickly.

CBO suggests there would be an 8% cut in spending in the first year.

Could cuts happen?

I talked to Natalie Davis, a former top official at the Centers for Medicare and Medicaid Services and co-founder and CEO of United States of Care, a nonprofit trying to improve the US health system. She’s doubtful lawmakers will let any cuts happen.

“Congress is going to act before this happens, if our history tells us anything,” she told me.

In the 1990s, among a number of deficit-reduction actions, Congress changed how doctors were reimbursed by Medicare. That system, which evolved into an annual political standoff known as the “doc fix,” has since been abandoned, but it did represent lawmakers working together to change the financial picture of Medicare.

Democrats changed the equation once again and bought the trust fund some years when they passed the Affordable Care Act, which raised payroll taxes for people making more than $200,000 per year.

If the trust fund is depleted, that does not mean Medicare will suddenly cease operating. Medicare Part B, which covers physician, outpatient and home health services, and Medicare Part D, which covers prescription drugs, have different funding mechanisms, including premiums paid by Medicare enrollees and money from the Treasury. The nonprofit Kaiser Family Foundation has an in-depth look at Medicare funding.

Not all cuts are equal

What constitutes a Medicare cut can be the subject of much disagreement.

Scott argued in an interview with CNN’s Kaitlan Collins on Thursday that when Democrats passed legislation giving Medicare the ability to negotiate some drug prices in an effort to cut down on drug prices, they cut Medicare benefits.

If Medicare is spending less money, isn’t that a cut? Seems more like savings. CNN’s Daniel Dale looked at the facts of Scott’s claim.

Social Security is running out of money too

The financial outlook of Social Security, the retirement and disability program that pays more than 65 million Americans a check once a month, is a bit different than it is for Medicare.

The cost of Social Security, which is funded through payroll taxes, began to be higher than its income in 2021 and will be higher in all future years, according to the most recent annual Social Security trustees report.

Two Social Security trust funds, both of which own US debt in the form of treasuries, should cover costs for the next decade. The trust fund that pays checks to seniors will be depleted in 2034. Starting in 2035, Social Security would only be able to pay 77% of benefits without government action.

CBO has a slightly dimmer view and says the trust fund that backs checks to seniors will be exhausted in 2033.

Difficult answers

In order to make Social Security solvent for the next 75 years, the trustees have done the math and say three things can be done:

  1. Increase the payroll tax that funds Social Security from 12.4% to 15.6 %.
  2. Reduce benefits by more than 20% to all current and future recipients or more than 24% for future beneficiaries.
  3. Combine some version of the tax increase and the benefit reduction.

The longer lawmakers wait, the more complicated the math becomes.

There are other ideas floating around. The Bipartisan Policy Center released a detailed proposal in 2016 that suggested changing the benefit formula and gradually raising the full retirement age by two years to 69.

Biden has suggested taxing the wealthy or raising corporate taxes. Others have suggested a wealth tax to bring in more revenue. Republicans have pushed spending cuts, although it’s not clear what exactly they would cut.

And it’s also important to note that these projections change. Medicare actually gained a few years of solvency during the pandemic. But the long-term trend has remained the same.

“The writing on the wall couldn’t be any more clear: Social Security and Medicare remain on a dangerously unsustainable path,” said Michael Peterson, CEO of the Peter G. Peterson Foundation, back when the trustees reports were released. “Unfortunately, instead of working to strengthen these essential programs, lawmakers have their heads buried in the sand while the trust fund depletion grows closer each year.”

Little appears to have changed in the eight months since he said those words.