Medicare’s trust fund will run out of money in 2024 and Social Security’s will be exhausted in 2036, according to the annual reports of their boards of trustees released Friday.
For Medicare, that’s five years earlier than predicted last year. For Social Security, it’s one year earlier.
Both programs have “sufficient resources to meet their obligations for the next decade,” Treasury Secretary Timothy Geithner said at a news conference. “Fundamentally, Social Security and Medicare benefits are secure today, but reform will be needed so that they will be there for current and future retirees.”
Geithner’s statement is also fundamentally what Treasury secretaries have been saying for years at annual news conferences. Social Security’s projected insolvency date has been in the mid-2030s for more than a decade.
Medicare’s earlier insolvency date is primarily because of technical changes. In this year’s forecast, economists are assuming a slower economic recovery and higher labor costs in the short term. The report says the program’s longer-term financial status hasn’t significantly deteriorated.
The need for changes isn’t in debate. The politics of change is acrimonious.
“With the release of this report,” said Sen. Orrin Hatch, R-Utah, “I hope the White House has a change of heart and puts our entitlement programs — the largest drivers of our debt — on the table in our discussions of deficit reduction.”
In his response to the report, Sen. Max Baucus, D-Mont., didn’t disagree about the need for change and a “long-term” solution. But, he said, “though we have high deficits and debt, Social Security is not the cause of those problems and shouldn’t be a scapegoat in our answer to them.”
Social Security spending exceeded its tax revenue last year for the first since 1983. The $49 billion deficit in 2010 and the $46 billion one expected in 2011 are both attributed to the weak economy.
Even when the economy recovers, Social Security is never again expected to be cash-positive. Interest earnings are expected to cover the gap through 2022. After that, the trust fund begins to decline.
Medicare’s trust fund applies only to the hospital insurance part of the program. The Part B and Part D doctor and drug benefits should not face the same insolvency problems because current law requires financing each year to meet next year’s expected costs.
The 2010 trustees’ report extended the Medicare fund by 12 years because of savings that were to have resulted from President Obama’s health care reform. Those savings have been called into question, though, because they include reduced payments to doctors. The trustees’ report notes that “the long-term viability of this provision is debatable.” Without those changes, the Medicare trust fund had been expected to run out of money in 2016.