Social Security, Medicare depletion dates get earlier

Social Security’s trust fund will run out of money in 2040, one year earlier than expected, and Medicare’s trust fund will be depleted in 2018, two years earlier than expected, trustees for the programs said in their annual report yesterday.

Administration officials said the bleak outlook is all the more reason for Congress to significantly reform both programs.

“We do not believe the currently-projected long-run growth rates of Social Security or Medicare are sustainable under current financing arrangements,” wrote the six trustees, who include the Social Security Administration commissioner and three Cabinet members. “The sooner that solutions are adopted, the more varied and gradual they can be.”

President Bush’s efforts to change Social Security stalled in Congress last year, with even some Republicans hesitant to support his plan to create personal accounts. And Medicare spending is unlikely to be cut by Congress this election year, as Mr. Bush has suggested.

The long-term outlook for both programs worsened slightly in the past year. Last year’s report projected that the Social Security Trust Fund would last until 2041 and Medicare’s hospital insurance trust fund would run out in 2020.

As in past years, trustees said Medicare’s situation is more dire. Costs exceeded income for the hospital insurance program in 2004, and it’s expected to go into the black briefly before it once again pays out more than it receives. The trust fund depletes in 2018, when the government will be able to cover only 80 percent of the costs. Medicare’s outpatient coverage and drug-benefit programs are expected to cost more and require increasingly more federal revenue to pay for them.

Social Security will pay out more than it takes in 2017, the same as last year’s projection.

“The Social Security problem remains with us,” warned Treasury Secretary John W. Snow, a trustee. Medicare, he said, faces “even greater and far-reaching challenges.”

Moreover, under the Medicare drug-benefit law, the numbers triggered an initial warning to Congress. If next year’s numbers do the same, an official warning will be issued and the president will have to submit Medicare reform legislation to Congress.

Democrats and liberal groups said the Bush administration’s policies have clearly hurt Medicare, because the trustees estimated in 2001 that Medicare’s trust fund would be depleted by 2029, more than a decade after the new estimate.

But trustees said the new Medicare drug program, known as Part D, is working well. “Premiums for Part D are sharply lower than projected,” said Mr. Snow, calling the new program “a success.”

House Minority Leader Nancy Pelosi, California Democrat, said the new 2018 estimate “is a direct result of the mismanagement of the economy, excessive subsidies to HMOs and the failure to constrain medical costs.”

The trustees said the 2018 date was created by higher-than-expected costs in 2005 and higher utilization rates estimated for the hospital insurance.

But conservatives complained that the administration’s new Medicare prescription-drug benefit is a big part of the fiscal problem.

Rep. Jeff Flake, an Arizona Republican who voted against the drug program, called for it to be scaled back. And John C. Goodman, president of the National Center for Policy Analysis and an administration health care adviser, noted the “unfunded liability” for Social Security — or the promised future benefits that government currently cannot pay — is projected to be $13.4 trillion, up from the $11 trillion projected in last year’s report. But the new drug program’s unfunded liability is projected to be $16.2 trillion.

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