Medicare and Social Security Spending Remain Problematic

By Monisha Bansal | July 7, 2008 | 8:24 PM EDT

( - Thursday's report from the Social Security and Medicare trustees prompted renewed calls for reform of the large entitlement programs.

According to the report from the secretaries of Treasury, Labor, and Health and Human Services, as well as the commissioner of Social Security, the "financial condition of the Social Security and Medicare programs remains problematic."

"Projected long run program costs are not sustainable under current financing arrangements," the report said. "Social Security's current annual surpluses of tax income over expenditures will begin to decline in 2011 and then turn into rapidly growing deficits as the baby boom generation retires.

"Medicare's financial status is even worse," the report highlighted. "Medicare's financial difficulties come sooner - and are much more severe - than those confronting Social Security.

"While both programs face demographic challenges, rapidly growing health care costs also affect Medicare," the report stated. "Underlying health care costs per enrollee are projected to rise faster than the wages per worker on which payroll taxes and Social Security benefits are based.

"As a result, while Medicare's annual costs were 3.2 percent of GDP in 2007, or nearly three quarters of Social Security's, they are projected to surpass Social Security expenditures in 2028 and reach 10.8 percent of GDP in 2082," the report added.

Brian Riedl, a fellow at the conservative Heritage Foundation, noted that funding this increase would involve "raising taxes by the current equivalent of $12,072 per household, eliminating every remaining federal program, including defense, education, and veterans' spending, or pushing the national debt to economic catastrophic levels."

Robert Hayes, president of the Medicare Rights Center, criticized the Bush administration for its handling of entitlement spending.

"There have been dire warnings of the imminent insolvency of the Medicare hospital insurance trust fund before, and Congress has addressed them by making careful and measured adjustments to how Medicare pays for services," he said in a statement.

"The Bush administration has rejected that approach and instead proposed draconian across-the-board cuts in its budget or measures that would shift more costs on to people with Medicare and undermine popular support for the program," Hayes added.

"The key issue is whether our nation believes that affordable health care should be a fundamental right for the American people," said Hayes. "The central question is whether the government can stand up to the politically powerful industries that recklessly and needlessly drive up the cost of health care for all Americans. President Bush has failed to do so.

"This administration has vowed to veto legislation that makes modest reductions to the excess subsidies received by Medicare private health plans," he said.

"These private plans cost taxpayers an average of 13 percent more per enrollee than it would cost to provide care under original Medicare. The overpayments add up to nearly $160 billion over the next ten years," Hayes added.

Congressional Republicans, however, blamed Democrats for the current situation.

"The trustees report is a solemn reminder that we do not have time for further delay," said House Minority Whip Roy Blunt (R-Mo.). "Congress must act, and act quickly, to deal with the fiscal emergency Social Security and Medicare are facing.

"We have all seen this crisis on the horizon for years, and yet the budget Democrats passed this month does nothing to put these programs on a solid foundation for the future," he said.

"In just over 10 years, Medicare will start spending more than it collects," Blunt noted. "There are really only two paths to take: raise taxes, kick the can down the road and ignore the problem as the Democrats have advocated, or do what our constituents elected us to do - find a solution.

"I hope the majority will join us to find a solution for current and future Medicare beneficiaries," he said.

Make media inquiries or request an interview about this article.

Subscribe to the free daily E-Brief.

E-mail a comment or news tip to Monisha Bansal

Send a Letter to the Editor about this article.