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Social Security disability recipients face 19% cut

Stephen Ohlemacher
Associated Press

Washington — The 11 million Americans who receive Social Security disability face steep benefit cuts next year, the government said Wednesday, handing lawmakers a fiscal and political crisis in the middle of a presidential campaign.

The trustees who oversee Social Security and Medicare said the disability trust fund will run out of money in late 2016. That would trigger an automatic 19 percent cut in benefits, unless Congress acts.

The average monthly benefit for disabled workers and their families is $1,017. The typical beneficiary would see a reduction of $193 a month.

“Today’s report shows that we must seek meaningful, in some instances even urgent, changes to ensure the program is on stable ground for future generations,” said Jo Ann Jenkins, the chief executive officer of AARP.

In more bad news for beneficiaries, the trustees project there will be no cost-of-living increase in benefits at the end of the year. It would mark only the third year without an increase since automatic adjustments were adopted in 1975.

Separately, about 7 million Medicare beneficiaries could face a monthly premium increase of at least $54 for outpatient coverage. That works out to an increase of more than 50 percent.

The annual report card on the financial health of Social Security and Medicare shows that the federal government’s largest benefit programs are feeling the strain of aging baby boomers as they both approach milestone anniversaries.

Medicare turns 50 at the end of the month and Social Security turns 80 two weeks later. Together, the programs accounted for more than 40 percent of federal spending last year.

There was some good news in the report: The trustees said Social Security’s retirement fund has enough money to pay full benefits until 2035, a year later than they predicted last year. At that point, Social Security will collect enough in payroll taxes to pay about 75 percent of benefits.

Medicare’s giant hospital trust fund is projected to be exhausted in 2030, the same date as last year’s report. At that point, Medicare taxes would be enough to pay 86 percent of benefits.

Advocates for seniors say that gives policymakers plenty of time to address both programs without cutting benefits. But some in Congress note that the longer lawmakers wait, the harder it gets to address the shortfall without making significant changes.

There is an easy fix available for the disability program: Congress could shift tax revenue from Social Security’s much larger retirement fund, as it has done in the past.

President Barack Obama supports the move. And acting Social Security Commissioner Carolyn Colvin said shifting the tax revenue “would have no adverse effect on the solvency of the overall Social Security program.”

But Republicans say they want changes in the disability program to reduce fraud and to encourage disabled workers to re-enter the workforce. “Washington has continually kicked the can down the road, and now ... it is time for Congress to take action,” said Sen. Rob Portman, R-Ohio.