By Joanne Bump
The Future of Social Security, Medicare, and Medicaid – At the 2026 State of the Union address held on February 24, 2026, the federal administration reviewed its policies. It mentioned that “We will always protect Social Security, Medicare and Medicaid, …” Most Americans were likely to have found this reassuring as they see these programs as central to their retirement financing. According to the Committee for a Responsible Federal Budget (CRFB), 40 percent of seniors rely on Social Security for a majority of their income.
Social Security (SS) Insolvency – What has been left unsaid by the administration is that the SS trust fund is projected to lose its ability to pay full benefits to its beneficiaries by late 2032, according to a revised estimate from the Tax Policy Center on 8-12-2025. It will not go bankrupt, but could start reducing SS checks to 80 percent of the normal benefits, according to the 2022 SS trustees annual report. So, this isn’t a new problem. Senator Bill Cassidy has been advocating for Congressional action to adequately fund SS as far back as 2017. (American Association of Retired Persons (AARP) in 2017)
Congress Needs to Act – According to an AARP 9-21-2023 article, Senator Cassidy is working on a new SS investment fund, that is separate from the SS Trust Funds. The new fund would be used to pay for most of the SS benefit payments in the future. This fund would produce greater returns compared to the Treasury securities where the SS payroll tax revenue is now invested. The SS Trust Funds are earning low interest rates which are not keeping up with inflation. Under the Cassidy plan, the federal government would put $1.5 trillion into an investment fund and let it grow for 70 years. If returns are in line with the historical market performance, the fund could cover 70 percent of the SS long-term shortfall. This “fix” would leave a much smaller amount to be covered by other options. To make this happen, a new SS law needs to clear a 60-vote threshold in the U.S. Senate requiring bipartisan support from both parties, according to Emerson Sprick at the Bipartisan Policy Center.
Fiscal Year (FY) 2027 White House Budget – The budget was released on April 2, 2026. But it didn’t address the future of SS. However, it recommended a gigantic increase in military spending with steep cuts to nondefense programs without forecasts for how it impacts the U.S. deficit. It recommended $1.5 trillion for defense, the highest military spending amount in modern history. This is coupled with $73 billion in cuts for domestic agencies, that includes elimination of main federal health, housing, and education programs.
Medicare & Medicaid – Also, the FY 2027 White House budget recommendation says the U.S. should concentrate more on funding defense and reduce spending on health care and day care, for example. The White House is recommending cuts in federal health care spending like Medicare and Medicaid, in order to finance as much as $200 billion to fund the Iran war and immigration enforcement, according to a 4-2-26 Axios article. They plan to transfer Medicare and Medicaid programs to the states. (Axios 4-2-2026) These ideas could add trillions of dollars to the federal debt. (New York Times 4-3-2026)
Impacts on Retirees – If Congress supports the administration’s budget, millions of seniors could suffer serious consequences like reductions to Medicare. More decreases could be made to long-term care and in-home support services that could have otherwise been funded by Medicaid. These costs could be shifted to seniors or their family, many who may not be able to afford them, impacting a family’s financial security. Even now when Medicare and Medicaid health insurance plans provide thousands of dollars of paid health insurance, seniors are still left paying thousands more for out-of-pocket costs each year. Importantly, these cuts could place the future of SS at risk, because when you cut one earned benefit, similar programs may no longer be safe from reductions.
Medicare Funding – Medicare funding is providedmostly from the federal trust funds, based on the payroll taxes, plus general tax revenue and beneficiary premiums.
Medicaid Funding – The states already pay a significant share of the Medicaid program. Traditional Medicaid expenditures are cooperatively funded by federal and state governments, based on the Federal Medical Assistance Percentage (FMAP). For Michigan, the federal government pays an FMAP rate of 65.3 percent in FY 2026. Michigan pays the remaining percentage of 34.7 percent. The FMAP rate is adjusted each year based on a three-year average for a given state’s average personal income, to the average national personal income.
State Impacts – States don’t have extra funds available in their budget to make up for what the federal government now pays for these programs. They are already struggling to find ways to partially fill the holes left by the administration from about a $1 trillion cut from Medicaid to fund a tax cut for the wealthiest from the One Big Beautiful Bill Act of 2025.
Balanced Budget Requirement – Michigan has to balance expenditures against revenues to achieve a balanced budget at year end. The federal administration is suggesting that states increase state taxes to pay for these programs like Medicare and Medicaid, without agreement from state lawmakers to do so. Details are not available on how much federal financing for Medicare and Medicaid would be left to finance state programs.
Joanne Bump serves as feature columnist for “Retirement Matters.” Column content is time sensitive and is based on information as of 4/5/26. Sources are primarily from non-profit, and government policy research organizations. Joanne can be contacted by e-mail at joannebump@gmail.com.