WASHINGTON (Reuters) - The U.S. Social Security and Medicare retirement and health programs for the elderly will run short of funds sooner than previously thought because the recession has taken a toll on tax revenues, a government report released on Tuesday showed.
The Social Security trust fund will be exhausted by 2037, four years earlier than previously estimated, and the Medicare hospital trust fund will become insolvent by 2017, two years earlier than estimated, said a report by the trustees of the two popular programs.
Labor Secretary Hilda Solis said that “the dual effect of the economy and unemployment has produced a downward pressure on the financial security” of the Social Security program.
The latest report said Medicare’s financial problems are more severe than those facing Social Security because of rapidly rising health-care costs.
Treasury Secretary Timothy Geithner said the report shows the urgency for the government to overhaul the two programs to help contain rising costs as the baby boom generation begins to retire and draw on benefits.
“The sooner we come together to make the difficult but achievable changes needed to strengthen the solvency of Medicare and Social Security, the more time we’ll give the American people to plan and to adjust, and the sooner we’ll be able to ensure that these vital programs will be as important for generations to come as they are today,” Geithner, one of trustees of the two programs, said at a news conference.
For years lawmakers have been concerned about the long term financing of the two programs as the 77 million strong baby boom generation retires.
A push by former President George W. Bush to partially privatize Social Security by creating individual investment accounts failed in the face of stiff opposition from Democrats.
President Barack Obama has promised to tackle the finances of both programs, but has put Social Security on the back burner while pushing to revamp the U.S. health-care system to contain soaring costs that are putting pressure on Medicare.
“The only way to truly slow Medicare spending is to slow overall health-care spending through comprehensive and carefully crafted legislation,” said Health and Human Services Secretary Kathleen Sebelius, another trustee. “This report makes it clear. Reform can’t wait.”
Backers of the health overhaul effort agreed.
“We cannot solve the problems in Medicare without addressing the crisis that plagues our entire health-care system,” said John Rother, the executive vice president of AARP, an influential group that represents older Americans.
Senator Charles Grassley, the top Republican on the Senate Finance Committee which is helping write health-care legislation, said the report shows the danger of creating a new government health insurance plan that some Democrats want to help provide medical coverage to an estimated 46 million uninsured Americans.
“When we can’t afford the public health plan we have already, does it make sense to add more?” Grassley said in a statement.
Senior members of the House Ways and Mean Committee issued a statement following release of the report saying lawmakers would act to ensure the programs remain solvent.
“Nothing in today’s report should give seniors a reason to be concerned that their benefits will not be paid in full,” Ways and Means Social Security subcommittee Chairman John Tanner, a Democrat, and Representative Sam Johnson, the top Republican on the subcommittee, said in a joint statement.
Additional reporting by Corbett B. Daly and David Lawder; Editing by Leslie Adler