Washington — The bad economy is worsening the already-shaky finances of Medicare and Social Security, draining the trust funds supporting them faster than expected and intensifying the need for Congress to shore up the massive benefit programs, the government said Friday.
Both Medicare and Social Security are being hit by a double whammy: the long-anticipated wave of retiring baby boomers and weaker-than-expected tax receipts, according to the annual report by the trustees who oversee the programs.
The Medicare hospital insurance fund for seniors is now projected to run out of money in 2024, five years earlier than last year’s estimate. The Social Security trust funds are projected to be drained in 2036, one year earlier than the last estimate. Once the trust funds are exhausted, both programs can only collect enough money in payroll taxes to pay partial benefits, the report said.
More immediate bad news for seniors: After they’ve gone two years with no cost-of-living increase in Social Security payments, the trustees project a 0.7 percent increase for next year, a raise so small that it will probably be wiped out by higher Medicare Part B premiums for most beneficiaries.
“There can no longer be any doubt or denial: Our nation’s Medicare and Social Security programs are unsustainable and will run out of money sooner than expected,” said Senate Republican Leader Mitch McConnell of Kentucky.
Congress and the Obama administration are negotiating possible changes to Medicare and other benefit programs as part of a deal to increase the government’s ability to borrow. The $14.3 trillion debt ceiling will be hit Monday, though Treasury officials are taking measures to put off an unprecedented default on government bonds until August, Treasury Secretary Timothy Geithner said.
Congress is putting off changes to Social Security, but Medicare, the government health insurance program for older Americans, is still on the table.
The longer Congress waits to fix the programs, the more likely it is that lawmakers will be forced to impose tax increases, deep benefit cuts, or both, to save them, the report said. By acting sooner, the trustees said Congress can impose gradual changes that reduce the impact on current beneficiaries and give future retirees time to prepare.