WASHINGTON - Medicare and Social Security trust funds will run out of money in 2017 and 2037, respectively - two to four years earlier than previously projected - because of the recession, trustees concluded in annual reports sent to Congress.
The reports were released yesterday after President Obama met with major health care providers Monday to secure a commitment to reduce health care costs by more than $2 trillion. Treasury Secretary Timothy Geithner also issued a statement on the reports saying the president "rejects the notion that Social Security is untouchable politically" and "will work to build a bipartisan consensus" on reform.
Asked about the findings, Liz Sweeney, director in health care ratings at Standard & Poor's, said: "You've got a lot of nonprofit hospitals that are in the tax-exempt sector, I think there's a growing sense that there's going to be some kind of reimbursement pressure from Medicare pretty soon. Whether that gets rolled into a broader health reform effort or if it's just part of the normal budget process is still to be determined."
The Medicare program's financial challenges "are larger and more imminent than those of Social Security," with the Medicare Hospital Insurance Trust Fund expected to become insolvent in 2017, one of the reports said.
Medicare's short-term outlook has been hurt by the recession and it faces demographic challenges and rapidly growing health care costs, the report said. Medicare's annual costs were 3.2% of gross domestic product, or nearly three quarters of Social Security's last year. But those costs are expected to surpass Social Security expenditures in 2028 and reach 11.4% of GDP in 2083, compared with 5.9% for Social Security, the report said.
The report said that while Social Security can continue to pay full benefits for almost 30 years, it only will be able to pay about 75% of scheduled benefits thereafter. The acceleration is primarily due to the economic recession, recent data that prompted a small downward adjustment to the projected level of real GDP after the economy recovers, and the belief that individuals will live longer in the future, the report said.