Less Healthy Outlook For Social Security, Medicare

A new report released Friday shows that two of America’s big entitlement programs are on course to become insolvent sooner than previously thought.

The reports, issued by the Board of Trustees for Social Security and Medicare, paint a bleaker picture regarding the future ability of the programs to pay out full benefits. Last year, the Trustees had projected that the Social Security trust fund would dry up by 2037. Now, they say it will happen in 2036, a year earlier. And the report put out by Medicare’s Trustees shows that the health insurance plan for seniors will run out of cash by 2024, not 2029 as was previously predicted.

Should the trust funds go empty, Social Security payments would be cut by 23%, while Medicare benefits in the form of payments to hosptials and other care providers would shrink by 10%.

Naturally, the news triggered reaction from both Republicans and Democrats, who are currently waging battles over whether or not to reform entitlements as part of a broader deal to fund the government next year.

“Today’s report yet again highlights the urgent need to save and strengthen our critical health and retirement security programs,” said House Budget Chairman Paul Ryan (R-Wis). “The Trustees Report makes it clear – the time for action is now.”

Ryan’s 2012 budget, which passed the House last month, addresses Medicare by transforming it from a guaranteed benefit into a system in which seniors would receive federal subsidies to purchase private health plans. Ryan says his plan would preserve Medicare for decades, but Democrats have criticized it roundly, arguing that it cuts benefits by turning the program into a voucher system.

Most Democrats have been reluctant to embrace the kind of reform Ryan has pushed for, but even Treasury Secretary Tim Geithner acknowledged that today’s reports “underscore the need to act sooner rather than later to make reforms to our entitlement programs.”

“We should not wait for the Trust Funds to be exhausted to make the reforms necessary to protect our current and future retirees,” Geithner added. “Larger, more difficult adjustments will be necessary if we delay reform. And making reforms soon that are phased in over time would help reduce uncertainty about future retirement benefits.”

Geithner serves as the chair of the Trustees’ panel. Health and Human Services Secretary Kathleen Sebelius and Labor Secretary Hilda Solis are also on the board.