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Retirement Planning > Social Security

U.S. Comptroller Warns On Benefit Costs

By Matt Brady

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Major changes need to be made to the national healthcare and social security systems to ensure that future needs are met, the head of the Government Accountability Office says.[@@]

Speaking at a symposium sponsored by MetLife and the American Benefits Council on the future of retirement benefits, U.S. Comptroller General David Walker said that the U.S. must change how it spends money for the social security and healthcare systems or else face severe problems in the future.

The need for change is the result of several factors, including the overall aging of the population, he said. In addition, labor force growth “has declined very rapidly and is expected to grow very slowly in the coming years,” Walker said.

How the government spends money is also a factor, he said. Social security spending has cut into the percentage of the federal budget spent on defense during the last 40 years, and the percentage spent on interest for national debt, long stable, is set to rise dramatically. In fact, Walker showed that interest payments would consume most, if not all, of federal revenues by 2040 if current trends continue.

“The past cannot be prologue to the future,” he said. “That cannot continue.”

Walker said that the issue should be looked at in terms of making changes and rethinking the entire social security system, rather than by changing or adding a program to the system.

“You have to look at it as a package,” he said. Individual programs, such as the private accounts proposed by the Bush administration, “are not an answer by themselves,” he said.

Even more important than Social Security is reforming the healthcare system, where rising costs increasingly could have a chilling effect on the overall economy, Walker warned. As an example, he noted that employers are less likely to hire new employees, or could hire them as part time workers rather than full time, to avoid the costs of providing healthcare benefits. Additionally, the Medicare and Medicaid systems are carrying astronomical amounts of unfunded obligations, he said.

“If there’s one thing that could bankrupt this nation, it’s healthcare costs,” he said. “That’s probably the only thing.”

Walker said that “ultimately, we’re going to have to reform the entire healthcare system, in increments,” putting an emphasis on demonstrating to consumers just how expensive healthcare has become for employers and the government.

“Individuals need to be more aware of the costs of healthcare,” he said, noting that the costs of providing health coverage are not currently presented to workers in a way that’s easy to see, such as on a W-2 earnings form.

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