By Ruth Mantell, MarketWatch
WASHINGTON (MarketWatch) — The outlook for Medicare’s finances have worsened on a slow economic recovery and higher costs, while the outlook for Social Security has also declined, trustees for the programs said Friday.
Medicare’s Hospital Insurance Trust Fund is now expected to be exhausted in 2024 – five years sooner than projected last year. Upon exhaustion, dedicated revenue will be able to pay 90% of costs for the hospital-insurance program.
Meanwhile, government officials said trust fund reserves for Social Security will be exhausted in 2036, one year sooner than expected last year. Afterwards, tax income will only be able to pay for three-quarters of scheduled benefits though 2085.
For the first time since 1983, Social Security spending was greater than non-interest income in 2010. A $46 billion deficit is projected for 2011, compared with $49 billion in the prior year.
Also, trust fund exhaustion for disability insurance is expected in 2018. Costs for disability insurance have been greater than non-interest income since 2005.
“Projected long-run program costs for both Medicare and Social Security are not sustainable under currently scheduled financing, and will require legislative modifications if disruptive consequences for beneficiaries and taxpayers are to be avoided,” according to a summary of the reports for the programs.
The reports about Social Security and Medicare come as U.S. lawmakers remain embroiled in arguments about how to tame the deficit. While House Republicans have presented a plan to cut Medicare, neither side has offered a formal proposal to curb Social Security’s rising costs.
On Friday the trustees urged prompt action from U.S. lawmakers, and noted that an aging population and spending growth in coming decades will ramp up costs for Social Security and Medicare, the two largest federal programs,
“If action is taken sooner rather than later, more options and more time will be available to phase in changes so that those affected have adequate time to prepare,” according to the trustees’ summary. “Earlier action will also afford elected officials with a greater opportunity to minimize adverse impacts on vulnerable populations, including lower-income workers and those who are already substantially dependent on program benefits.”
Beneficiaries of Medicare and Social Security are worried that lawmakers’ proposals could result in harmful cuts.
“As leaders begin to hammer out solutions, we urge them not to subject Medicare and Social Security to arbitrary spending limits that could jeopardize the benefits that millions of older Americans have earned through a life time of hard work,” said A. Barry Rand, AARP’s chief executive, in a recent statement.
“Rather than singling out Medicare, we believe the focus of any reforms should be on making the delivery of health care more efficient and cost effective to all Americans. And we believe we should tackle our budgetary challenges and devise common-sense solutions without making damaging cuts to Social Security — which, as a self-financed program, should be addressed in a separate debate focused on the need for retirement security.”
Treasury Secretary Timothy Geithner called for reforms to protect current and future retirees, saying “larger, more difficult adjustments” will be needed if reform is delayed.
He added the debt limit is due to be reached by Monday.
“Because Congress has not yet acted, we have now set in motion a series of extraordinary measures that will give Congress some additional time to raise the debt limit. I want to again encourage Congress to move as quickly as possible, so that all Americans will remain confident that the United States will meet all of its obligations – not just our interest payments but also our commitments to our seniors,” Geithner said in a statement.
Ruth Mantell is a MarketWatch reporter based in Washington.