* Medicare fund could run out in 2024
* Retirement fund's future getting darker
* Lawmakers urged to act now or face consequences
By Rachelle Younglai and Glenn Somerville
WASHINGTON, April 23 Aging baby boomers got some
jolting news on Monday when the U.S. government said the Social
Security retirement program is on track to go bankrupt three
years earlier than expected if reforms are not made.
Unless Washington politicians, who have been at war with
each other over government spending priorities and federal
budget deficits, can decide how to put Social Security on a
sound footing, retirees' pension checks would start running out
in 2033, according to an annual report.
The baby boomers - those 78 million Americans born between
1946 and 1964 - started retiring last year. With 10,000 of them
expected to retire every day for the next 19 years, according to
the Pew Research Center, they will increasingly strain Social
"Never since the 1983 reforms have we come as close to the
point of trust-fund depletion as we are right now," trustee
Charles Blahous told reporters. "Our window for dealing with it
without substantially disruptive consequences is closing very
rapidly," he said.
Meanwhile, the Medicare healthcare fund for the elderly is
still is headed for exhaustion in 2024, the same date estimated
last year. But it was uncertain whether the assumptions used in
arriving at the estimate were overly optimistic.
Blahous and fellow trustee Robert Reischauer said lawmakers
should be aware that it will become increasingly difficult to
"avoid adverse effects" on retirees or those close to retirement
if legislative changes are delayed much longer.
For example, Americans' average real earnings are forecast
to grow more slowly than previously thought, crimping revenue
from the taxes that pay for the benefits, the report noted.
Even when the fund starts to run out of money in 2033, it
would be able to pay 75 percent of benefits. An alternative, in
order to keep payments at 100 percent, would be to raise the
payroll tax on employers and employees to 16.7 percent from its
regular 12.4 percent rate.
Members of Congress also have mulled raising the retirement
age or cutting some benefits to the wealthy. But no action is
expected before the November elections.
Trustees for the fund said a disability insurance program,
which is generally lumped in with Social Security, faces the
most immediate financing shortfall. It said that fund will
likely be depleted in 2016, two years earlier than projected
Even as Republicans, including Republican presidential
candidate Mitt Romney, push to repeal the Obama administration's
signature healthcare law, Secretary of Health Kathleen Sebelius,
claimed that without it, the Medicare fund would in fact have
been depleted by 2016 instead of 2024.
"As a result of the law, we have added another eight years
to its life, putting Medicare on much more solid ground,"
Sebelius told reporters. But the fund's longevity rests on
shifting ground because of the possibility of changes in law and
in the economy's direction.
For example, President Barack Obama's healthcare law enacted
in 2010 may be overturned by the Supreme Court. And some
assumptions used to estimate the depletion of the trust funds -
such as hefty cuts in pay rates for physician services - might
Trustees warned that costs for Medicare were on the rise,
and likely to leap from about 3.7 percent of gross domestic
product in 2011 to 5.7 percent by 2035.
The declining condition of the Medicare and Social Security
funds - blamed on the aging population and rising healthcare
costs - fueled fresh calls from Republicans to overhaul the
costly benefits programs.
"As this report shows, leaving Medicare and Social Security
on autopilot and allowing them to continue to grow beyond their
means is no longer an option," said Senator Orrin Hatch of Utah,
the senior Republican on the committee that oversees these huge
Obama and his Democrats accuse Republicans of proposing
Medicare changes that would dangerously raise healthcare costs
for seniors, while Republicans claim the administration's
free-wheeling spending has pushed the nation's debt to perilous
Republicans in the House of Representatives have proposed
giving seniors the option of having traditional Medicare or a
competing plan through a government-run exchange. A previous
Republican proposal from House Budget Chairman Paul Ryan sought
to privatize Medicare, unleashing a storm of criticism from
seniors and Democrats.
"Young people have come to wonder what would be their lot
when they came to old age." That quote could have come from this
latest trustees' report, given Americans' worries about the
future of Social Security and Medicare.
But it actually was part of President Franklin Roosevelt's
statement when he signed Social Security into law on Aug. 14,
1935 with the aim of permanently protecting "against
poverty-ridden old age."