Unsurprisingly, Medicare and Social Security Will Run Dry Soon
Here is the good news: trustees for the Medicare program said Friday that its hospital insurance fund would be exhausted in 2026, two years later than was estimated a year ago. However, Social Security’s reserves are still expected to run out by 2033, just as earlier forecasts said.
The marginally better snapshot of the financial health of these two politically sensitive entitlement programs will likely do little to quell the partisan debate brewing over such programs and overall government spending. This debate between Congress and the Obama administration will transition into high gear this fall as the deadline for raising the United States debt ceiling draws nearer. Another moment of crisis will be when it comes time to pass the federal budget for the next fiscal year, which begins on October 1. Both House Republicans and Senate Democrats have passed their own prototypes, but they differ greatly in their approaches to taxes and spending.
“Today’s reports make clear that while both Social Security and Medicare have sufficient resources to meet their obligations for at least the next decade, it is important that we put in place reforms to strengthen these programs,” noted the Department of the Treasury on Friday. “Fundamentally, Social Security and Medicare benefits are secure today, but reform will be needed so that they will continue to be there for current and future retirees.”
The longer expected lifespan of Medicare’s trust fund means that benefits will not have to be reduced as quickly as previously thought. However, in their annual report, the trustees who oversee Social Security said that reserves for the fund that pays disability benefits would be exhausted by 2016, and all Social Security reserves, including the fund that pays retirement benefits, would run out by 2033.
“These programs face long-term challenges,” added Treasury Secretary Jacob Lew in a statement. “Social Security and Medicare represent a fundamental obligation we have as a country to provide income and health care security for our fellow citizens.”
Trustees of the Medicare program said that the improvement for the program’s fund was due to lower projected hospital insurance spending. More interesting, given the debate surrounding the healthcare reform, is that the trustees said the Affordable Care Act championed by President Barack Obama extended the life of the Medicare fund by reducing costs. This is a point that Lew highlights in his statement.
Comparatively, Republican lawmakers have argued that Obamacare will drive up healthcare costs, increase insurance premiums, hurt the quality of healthcare, raise taxes, and blow up the deficit. They have tried a series of more than 37 legislative gimmicks — including procedural moves, budgeting provisions, and outright legislation — to take the law off the books. Alongside their campaign against the healthcare reform bill, Republicans in the House of Representatives and in the Senate have called for cuts to retirement programs, a demand that could factor heavily into negotiations over raising the U.S. debt limit. Currently, the program pays retirement and disability benefits to 57 million Americans, with the average monthly benefit amounting to $1,270 as of April.
In his most recent budget, Obama offered to shrink the growth of Social Security benefits as part of a larger effort to reduce the deficit; the president’s fiscal 2014 budget would limit the growth of Medicare and other health-program spending by approximately $400 billion over the next 10 years by asking wealthier Medicare beneficiaries to pay more, in addition to several other strategies. However, Republicans said the cuts did not go far enough.
Republicans and Democrats differ greatly in their plans to fix Medicare. House Budget Committee Chairman Paul Ryan, a Wisconsin Republican, authored an overhaul of Medicare that would enable seniors to either receive subsidies to buy their own health insurance or keep the traditional program. Democrats contend that his plan is a “non-starter”
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