–Trustees Report:Social Security Exhausted 1 Year Earlier Than 2010 Est
–Medicare Assets Exhausted 2024, 5 Years Earlier Than Previous Report
By Heather Scott
WASHINGTON (MNI) – U.S. Treasury Secretary Tim Geithner announced
Friday that Social Security will exhaust its assets in 2036, one year
earlier than estimated in 2010, while Medicare will go bust in 2034,
five years earlier than previously expected.
Geithner released the Social Security and Medicare Trustees annual
reports, which show the short-term impact of the recession and the
long-term impact of rising health care costs and beneficiaries.
“The Trustees Reports underscores the need to act sooner rather
than later to make reforms to our entitlement programs,” Geithner said
in his prepared remarks.
“We should not wait for the Trust Funds to be exhausted to make the
reforms necessary to protect our current and future retirees. Larger,
more difficult adjustments will be necessary if we delay reform,” he
warned. “And making reforms soon that are phased in over time would help
reduce uncertainty about future retirement benefits.”
And while the Affordable Care Act implemented last year has shown
it is possible to bring health care costs down, Geithner stressed that
“if we do not do more to contain health care costs, our commitments will
Although “the Social Security program has dedicated resources that
will cover benefits for the next 25 years,” and the reports show “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.
‘Fundamentally, Social Security and Medicare benefits are secure
today, but reform will be needed so that they will be there for current
and future retirees,” Geithner said.
The trustees — Geithner, Health and Human Services Secretary
Kathleen Sebelius, Labor Secretary Hilda Solis, Social Security
Commissioner Michael Astrue, and public trustees Charles Blahous and
Robert Reischauer — offered this warning:
“Projected long-run program costs for both Medicare and Social
Security are not sustainable under currently scheduled financing, and
will require legislative corrections if disruptive consequences for
beneficiaries and taxpayers are to be avoided.”
A summary of the reports showed that after 2022 Social Security
trust fund assets “will be redeemed in amounts that exceed interest
earnings until trust fund reserves are exhausted in 2036, one year
earlier than was project last year.
“Thereafter, tax income would be sufficient to pay only about
three-quarters of scheduled benefits through 2085,” the report said.
Program costs are expect to increase to 6.2% of GDP by 2035 from
4.2% in 2007, before falling to 6.0% in 2050.
The short-term picture shows the impact of the recession: “Social
Security expenditures exceeded the program’s non-interest income in 2010
for the first time since 1983.”
The deficit last year of $49 billion, which is project to fall to
$46 billion this year, excluding interest income, “are in large part due
to the weakened economy and to downward income adjustments that correct
for excess payroll tax revenue credited to the trust funds in earlier
years,” the report said.
“The deficit is expected to shrink to about $20 billion for year
2012-2014 as the economy strengthens,” the trustees said.
But they cautioned: “After 2014, cash deficits are expected to grow
rapidly as the number of beneficiaries continues to grow at a
substantially faster rate than the number of covered workers.”
Then after 2022, the deficits will be made up “by redeeming trust
Medicare costs also are growing sharply, and are expected to reach
5.5% of GDP in 2035 from 3.6% last year, and continue to increase to
6.2% in 2085, the report said.
The Medicare trust fund “is expected to pay out more in hospital
benefits and other expenditures than it receives in income in all future
years,” the report said. “The projected at of the (Medicare) Trust Fund
exhaustion is 2024, five years earlier than estimate in last year’s
The trustees noted that the worsening of projected finances is
primarily due to lower real non-interest income “caused by a slower
assumed economic recovery,” and by higher costs.
** Market News International Washington Bureau: 202-371-2121 **