Recession worsens outlook for Social Security, Medicare
Posted on 13 May 2009
By Mark Miller
Permanent URL of this article: http://retirementrevised.com/money/recession-worsens-outlook-for-social-security-medicare
News that Social Security and Medicare are on track to run out of money earlier than previously expected will turn up the heat in Washington to enact reforms to both programs.
The Obama Administration said that the recession has pushed up the forecast dates when Social Security and Medicare could run out of money, unless changes are made to the programs. The steep job losses caused by the economic crash have cut into government collection of payroll taxes, a key source of funding for both programs. The Obama Administration said Medicare Part A, which funds hospital bills, is expected to run out of funding in 2017, two years than projected earlier. The Social Security trust fund would be tapped out in 2037, four years earlier than forecast.
Social Security’s problem is relatively straightforward: its rising costs are the result of an aging population, rising numbers of retirees and declining numbers of workers paying payroll taxes to support those retirees’ benefit checks. The options for a repair include boosting the payroll taxes that fund the program, raising the maximum amount of Social Security benefits subject to tax, or gradually raising the age of full benefit eligibility (also known as Normal Retirement Age–about 66 for most baby boomers.
Medicare has the additional complication of rising health care costs and utilization—that is, the amount of health care we consume. Medicare expenditures are expected to account for roughly 14 percent of the overall federal budget in 2009; expenses are rising much faster than overall inflation. Solutions likely will be wrapped up in whatever broader health care reform is enacted this year. But higher Medicare premiums, co-payments and deductibles could also be in the cards. The Obama Administration also has indicated it wants to achieve savings by reigning in privatized programs such as Medicare Advantage and Part D prescription drug coverage.
See also: coverage in The Washington Post.
