Medicare and Social Security are on a fast track to deep fiscal problems, trustees for the two programs warned Monday.
The Medicare trust fund will be “exhausted” — meaning it won’t have enough money on hand to cover the benefits it’s supposed to provide — by 2024, the trustees said, the same time frame anticipated in a report last year. Social Security will reach that tipping point in 2033, three years earlier than predicted last year.
“Under current law, both of these vitally important programs are on unsustainable paths,” Trustee Robert Reischauer said Monday.
Both parties looked to score political points on the news, with Obama administration officials saying Medicare’s woes would be far more severe without the 2010 healthcare law, while Republicans used the new estimates to argue that President Obama isn’t serious about entitlement reform.
The trustees called on Congress to repair the entitlements quickly, saying a prompt approach would leave more options on the table and allow lawmakers to make changes gradually.
But even at the trustees’ press conference, the deep political divisions over Medicare were on full display.
Treasury Secretary Timothy Geithner took a pre-emptive shot at Republican-led proposals to partially privatize Medicare.
“Adjustments to Social Security and Medicare must be balanced and evenhanded,” Geithner said. “We will not support proposals that sow the seeds of their destruction in the name of reform, or that shift the cost of healthcare to seniors in order to sustain tax cuts for the most fortunate Americans.”
Many Republicans — including presidential candidate Mitt Romney — want to convert Medicare into subsidies to help seniors buy private insurance. Romney’s campaign said Monday’s trustees’ report showed that Obama doesn’t have a serious plan to tackle entitlement spending.
“Today’s report reminds us that Medicare must be reformed and strengthened or it will soon collapse,” Romney’s policy director, Lanhee Chen, said in a statement. “It also reminds us that President Obama continues to play shell games with the healthcare of our seniors, taking hundreds of billions from Medicare to spend on ObamaCare and now using a bogus experiment to conceal the damage until after the election.”
Administration officials, however, noted that the trustees have said Obama’s healthcare law extended Medicare’s solvency.
“One of the most important things we can do right now to preserve Medicare is to implement the Affordable Care Act fully and effectively,” Geithner said.
Health and Human Services Secretary Kathleen Sebelius also argued that initiatives to better coordinate healthcare and change the way Medicare pays doctors will yield significant savings. Many of those programs aren’t yet in place.
“In the long run, the healthcare law will do even more to stabilize Medicare’s finances than the report today indicates,” Sebelius said.
Reischauer said one of the key questions for Medicare will be whether Congress can “adhere to the discipline contained in the Affordable Care Act,” which cuts many Medicare payments to doctors and other providers. It does not directly cut seniors’ benefits.
Medicare’s chief actuary, however, has consistently warned that Congress is likely to block some of the healthcare law’s Medicare savings. The trustees have to assume that the letter of current law will be carried out, but those assumptions “do not represent a reasonable expectation” for Medicare spending, the actuary said in a separate memo.
And even if Congress doesn’t get in the way of the healthcare law’s cuts, other changes “above and beyond the Affordable Care Act” will still be required, Reischauer said.
Although he repeatedly urged Congress to tackle the entitlement programs quickly, some Democrats downplayed the programs’ impending shortfalls. House Democratic Leader Nancy Pelosi (Calif.) emphasized that Medicare and Social Security can still pay their bills for the time being.
“Despite the repeated efforts of Republicans to privatize Social Security and end the Medicare guarantee, these vital initiatives remain strong,” she said. “Today’s trustees’ report affirms that Social Security and Medicare will continue to provide critical benefits to seniors and other Americans.”
The trustees don’t expect the Medicare and Social Security trust funds to be empty in 2024 and 2033. Rather, at those dates, the funds wouldn’t have enough money on hand to cover the benefits they’re supposed to provide, so some reductions would be inevitable.
The Social Security trust fund would be able to pay about 75 percent of its benefits after 2033, the trustees said. The Medicare trust fund will be able to pay roughly 87 percent of its costs in 2024.
The Medicare fund only pays for certain benefits, primarily those for hospital stays. Services such as doctors’ visits and prescription drugs are paid for separately, and those funds don’t come from a dedicated account like the trust fund for hospital coverage.
This story was posted at 1:45 and updated at 5:03 p.m.