Social Security, Medicare facing unhealthy future

WASHINGTON - The financial health of Social Security and Medicare, the government's two biggest benefit programs, have worsened because of the severe recession, and Medicare is now paying out more than it receives.

Trustees of the programs said yesterday that Social Security will start paying out more in benefits than it collects in taxes in 2016, one year sooner than was projected last year, and the giant trust fund will be depleted by 2037, four years sooner than projected.

More immediately, the trustees do not expect Social Security recipients to get cost-of-living increases in 2010 or 2011, something that hasn't happened since automatic adjustments were adopted in 1975.

The Social Security Administration will set next year's cost-of-living adjustment in October, based on inflation over the previous year.

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, just as it did for the first time in 2008. Medicare is projected to be insolvent by 2017, two years earlier than the date projected in last year's report.

The trust funds - which exist in paper form in a filing cabinet in Parkersburg, W.Va. - are bonds that are backed by the government's "full faith and credit" but not by any actual assets. That money has been spent over the years to fund other parts of government. To redeem the trust fund bonds, the government would have to borrow in public debt markets or raise taxes.

Treasury Secretary Timothy Geithner, the head of the trustees group, said the new reports were a reminder 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."

Geithner said that President Obama was committed to working with Congress to find ways to control runaway growth in both public and private healthcare expenditures. He noted the promise Monday by major healthcare providers to trim costs by $2 trillion over the next decade.

However, Republicans pointed to the newly dire assessments as evidence the Obama administration has failed to come forward with actual entitlement reform to close the funding gaps.

House Republican leader John Boehner said the trustees' report "confirms what we already knew: Our nation cannot afford to continue this reckless borrowing and spending spree."

The findings in the trustees' report, the annual checkup given the two benefit 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 the dates the trust funds would be insolvent would occur sooner given the economic recession.

The deep recession, the worst the country has endured 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.