Medicare and Social Security in Trouble
Yesterday the trustees for Medicare and Social Security released reports outlining the finances of these two programs that made up 41 percent of all federal spending in 2013. The trustees’ findings reveal a bleak outlook. As with every other report on the long-term budgetary health of our nation, they show the need to stop delaying and to start strengthening these programs.
Social Security Trust Funds Go Broke
Combined OASDI trust funds
The disability and old age trust funds that make up Social Security are legally separate, but the trustees typically consider their finances together to estimate the date that all of Social Security will be bankrupt. The combined Social Security trust funds will have to start redeeming Treasury bonds in 2020 in order to meet annual benefits owed. These trust funds will be exhausted in 2033, the same estimate as last year’s report. When considered separately, the disability trust fund is projected to be depleted in 2016, the same projection as last year’s report. At that time, tax receipts into the disability trust fund would only be sufficient to pay 81 percent of benefits. Total paid disability benefits have increased 35 percent from $106 billion in 2008 to $143.4 billion in 2013.
After the trust funds are depleted, the combined Social Security trust funds will only have enough incoming tax receipts to pay 77 percent of promised benefits – assuming that the crushing national debt that CBO warned about last week has not devastated the economy and workforce.
Medicare's Hospital Insurance or “Part A” trust fund is projected to go bankrupt in 2030. This is better than last year’s projection of 2026, but it is still only 16 years from now. The trustees estimate that Medicare spending will nearly double as a percentage of GDP, going from 3.5 percent to 6.9 percent over the next 75 years.
Despite Democrats’ claims about slowing health care costs, the two public trustees – Charles Blahous and Robert Reischauer – note that a recent slowdown in health care cost growth does not significantly improve Medicare’s finances. They state that the trustees’ report has assumed for years that health care cost growth would slow. Even given this assumption, Medicare’s fiscal situation will still need legislative attention.
Reforms Needed As Soon As Possible
“Taking action sooner rather than later will leave more options and more time available to phase in changes so that the public has adequate time to prepare.” – Trustees’ Message to the Public, July 28, 2014
President Obama has been absent from the public discussion on the need for Medicare and Social Security reform since 2011. Even then, he was forced into discussions on entitlement reforms by Republicans when the debt ceiling needed to be raised. He failed to lead on a hugely significant national problem. Yesterday’s report should serve as yet another wake-up call – Washington cannot maintain the status quo without the economy and these vital assistance programs all suffering.
Next Article Previous Article