Social Security, Medicare finances worsen

UPDATED:

The continuing U.S. recession has worsened the financial health of the government’s two biggest benefit programs, figures released Tuesday showed.

Medicare, the main medical program for the elderly and disabled, will even pay out more in benefits this year than the government collects in taxes for it.

The findings released by the trustees of Medicare and Social Security, the government’s pension system begun during the Great Depression of the 1930s, is a blow to President Obama’s plans for a major reconfiguration of the health-care-delivery system in the country. A major part of his campaign last year was to bring almost universal government-run health care to the United States, one of the few developed countries whose medical systems are based on private medicine.

Both Social Security and Medicare are financed through payroll contributions from workers and employers.

The findings in the trustees’ annual checkup on the programs did not come as a surprise. Private economists had been predicting that the dates the programs would begin to pay out more than they take in and that the dates the trust funds would be insolvent would occur sooner, given the economic recession.

The deep recession, the worst in decades, has resulted in a loss of 5.7 million jobs since it began in December 2007. The unemployment rate hit a 25-year high of 8.9 percent in April.

Fewer people working means less being paid into the trust funds for the benefits programs.

The trustees said Tuesday that Social Security will start paying out more in benefits than it collects in taxes in 2016, one year sooner than projected last year. Its giant trust fund will be depleted by 2037, four years sooner, they said.

Medicare is in even worse shape. The trustees said the program for hospital expenses will pay out more in benefits than it collects this year and will be insolvent by 2017, two years earlier than the date projected in last year’s report.

Treasury Secretary Timothy F. Geithner, head of the trustees group, said the new reports were reminders that “the longer we wait to address the long-term solvency of Medicare and Social Security, the sooner those challenges will be upon us and the harder the options will be.”

For decades, almost every president has tried to tackle the approaching certainty that the hugely popular programs were running out of money. Even before the current recession, it was obvious that the aging of the baby boomer generation, the mass of people born between 1946 and 1964, would put too great a burden on the programs because of retirement needs and old-age medical problems.

Mr. Geithner said Mr. Obama was committed to working with Congress to find ways to control runaway growth in both public and private health-care expenditures. Major health-care providers promised the president on Monday to trim costs by $2 trillion over the next decade.

The Congressional Budget Office recently projected that Social Security will collect just $3 billion more in 2010 than it will pay out in benefits. A year ago, the nonpartisan CBO projected that Social Security would have a much higher $86 billion cash surplus for the 2010 budget year, which begins Oct. 1.

The trustees’ report projected that Social Security’s annual surpluses would “fall sharply this year,” then remain at a reduced level in 2010 and be lower in the following years than last year’s projections. The report said that the Social Security annual surplus would be eliminated entirely in 2016, reflecting increased retirement demands of the wave of 78 million baby boomers.

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