The trustees who oversee the finances of Medicare and Social Security said Friday that both programs will exhaust their trust funds sooner than previously expected.
The Medicare Trustees report projected funds for the Medicare hospital insurance fund would be insolvent by 2024. That’s five years earlier than last year’s estimate. Last year’s report extended the life of the Medicare fund by 12 years to include projected savings under the health care reform law.
Given the continuing battle playing out debts, deficits and entitlement spending, Treasury Secretary Timothy Geithner, who is chairman of the trustee’s panel, told reporters Friday that the new projections demonstrate “the need to act sooner rather than later to make reforms to our entitlement programs.”
“We should not wait for the trust funds to be exhausted,” he said, “to protect our current and future retirees.”
Social Security’s trust fund will be exhausted in 2036, one year earlier than estimated.
But administration officials were quick to point out that the program will still pay benefits then — but not the full amount that retirees expect.
“Exhaustion in 2036 means that we’ll have money to pay a little more than three-quarters of the benefit,” said Michael Astrue, commissioner of the Social Security Administration.
“That’s not good,” he said, and emphasized that a program that supplies about 41 percent of all income for Americans over 65 will be totally bankrupt.
The trustees for both funds blamed the new projections on a sour economy, which they said lowered contributions from workers and employers, and escalating health care costs.
Increasing life expectancy also played a significant role in the new Social Security estimates.
The new report projects an even longer life span for men who turned 65 last year, saying they can expected to live another 18.6 years. That’s an extra half year compared to the previous estimate.
Liberal interest groups and economists said that factor should be considered before making trims to Social Security benefits.
“While the assumption of longer life expectancies does raise the cost of Social Security and Medicare, the projected shortfalls in both programs are still relatively modest,” Dean Baker, the co-director of the Center for Economic Policy and Research wrote in a statement. “Measured as a share of GDP, the combined shortfalls are roughly half the increase in the share of GDP devoted to military spending between 2000 and 2011.”
But House Speaker John Boehner said the report was a wake-up call to take action to reduce the total costs of Medicare.
“The biggest threat Medicare faces right now is the status quo,” he wrote in a statement. “The trustees’ report makes it clear that if we do nothing, Medicare will not be able to pay promised benefits to American seniors – and sooner than we thought. That is the real challenge our nation faces. It’s time for the grown-ups in the room to stand and be counted.”
Social Security provides income to more than 54 million Americans each year totaling more than $730 million. Medicare pays for most of the cost of health care for nearly 48 million seniors.
Obama administration officials tried to shed a positive light on the latest projections. Medicare chief Dr. Donald Berwick said that without the “reforms in the Affordable Care Act” — the new federal health care reform law — the outlook for Medicare’s trust fund “would be much worse.” He said provisions of the new law had added eight years of solvency to the Medicare Trust Fund.
In a White House blog, Health and Human Services Secretary Kathleen Sebelius wrote, “without the historic reductions in the Affordable Care Act, Medicare would have gone bankrupt in 2016-only five years from now.” Sebelius criticized a Republican plan that would change the current Medicare program into one in which American seniors would be given vouchers to buy private health insurance.
The secretary also said that the proposal “would take us backwards,” adding “that’s the wrong way to reform Medicare.” It would “end Medicare as we know it,” she said, and “shift costs to seniors and the most vulnerable.”
But Boehner and other top Republicans said their plan was being unfairly attacked by Democrats.
“We’ve outlined a proposal that would mean no changes for anyone age 55 and up, while making reforms to ensure that Medicare is around when younger Americans and future generations are ready to retire,” Boehner wrote.
The new projections from the two trust funds are expected to put additional pressure on lawmakers on Capitol Hill, who’ve been deeply involved in talks about what to do to bring down the nation’s federal deficit, which now totals more than $14 trillion.