The Social Security Administration confirmed Tuesday Social Security and Medicare funds are depleting at a rate faster than expected.
Lawmakers are urging major reform of the nation’s health care system sooner rather than later to avoid what Treasury Secretary Timothy Geithner calls “runaway expenditures” in both public and private health care sectors.
The Social Security Board of Trustees released its annual report on the financial health of the Social Security Trust Funds. According to a press release, the Trustees project that program costs will exceed tax revenues in 2016, one year sooner than projected in last year’s report. The combined assets of the Old-Age and Survivors, and Disability Insurance (OASDI) Trust Funds will be exhausted in 2037, four years sooner than projected last year. The worsening of the long-range outlook for the Social Security program is due primarily to the recent economic downturn and faster reductions in mortality than previously assumed.
The Trustees Reports come to the following conclusions:
- The Medicare program’s financial challenges are larger and more imminent than those of Social Security. Medicare faces demographic challenges, rapidly growing health care costs and the short-term outlook has been hurt by the recession. Medicare’s annual costs were 3.2 percent of GDP in 2008, or nearly three-quarters of Social Security’s, but are projected to surpass Social Security expenditures in 2028 and to reach 11.4 percent of GDP in 2083, compared with 5.9 percent for Social Security.
- Medicare’s Hospital Insurance Trust Fund is projected to become insolvent in 2017, two years earlier than projected in last year’s Report.
- The cost of Medicare’s Supplementary Medical Insurance (SMI) to the federal government is projected to increase rapidly. General revenue financing for SMI is expected to increase from about 1.3 percent of GDP in 2008 to over 4.7 percent in 2083, with continued increases beyond 75 years.
- This year’s Social Security Report projects that the Trust Fund will be exhausted in 2037, four years earlier than the Trustees projected last year. This change 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 fact that our citizens are on average projected to live longer lives. Nevertheless, Social Security can continue to pay full benefits for nearly 30 years, and cover approximately 75 percent of scheduled benefits thereafter.
“Despite projections that Social Security can continue to pay full benefits for nearly 30 years, the sooner action is taken the more options for reform will be available and the fairer reforms will be to our children and grandchildren,” Geithner said.
Secretary Geithner added the Obama Administration is intent on reforming the health care system by controlling costs while improving quality. Just yesterday, he said, President Obama met with major health care providers to get them to commit to reducing costs of care by more than $2 trillion.
Geithner said the president wants to build a bipartisan consensus to ensure the long-term solvency of Social Security.
“The President explicitly rejects the notion that Social Security is an untouchable politically and instead believes there is opportunity for a new consensus on Social Security reform,” Geithner said.