WASHINGTON — The foul economy has shaved a few more years off the life expectancy of Medicare and Social Security, according to a new government report released Friday.
Medicare's Hospital Insurance Trust Fund — which pays for hospital, home health, skilled nursing and hospice care for the elderly and the disabled — will run out of money in 2024. That's five years earlier than last year's trustee report projected.
Social Security has enough cash to cover benefits for 25 more years but will become insolvent in 2036, when revenues no longer will cover full benefit payments. Last year's trustee report projected that the Social Security Trust Fund would go broke in 2037. Longer life expectancy was the main cause of the year-to-year change.
There was more immediate bad news for seniors: After they've gone two years with no cost-of-living increase in Social Security payments, the trustees project just a 0.7 percent increase for next year, a raise so small that it will probably be wiped out by higher Medicare Part B premiums for most beneficiaries.
Nearly 55 million retirees, disabled people and children who have lost parents receive Social Security benefits, which average $1,077 monthly. More than 47 million people are covered by Medicare.
While Medicare's funding woes are deeper than Social Security's, Treasury Secretary Tim Geithner said the reports show the need to revamp both of the programs sooner rather than later.
"We should not wait for the trust funds to be exhausted to make the reforms necessary to protect our current and future retirees," Geithner said. "Larger, more difficult adjustment will be necessary if we delay reform. Making reforms soon that are phased in over time would help reduce uncertainty about future retirement benefits."
Social Security paid benefits of $702 billion to roughly 54 million beneficiaries in 2010. Medicare, the public health program for seniors, provided services for 47.5 million people at a cost of $523 billion last year.
The trustees said last year that provisions of the 2010 Affordable Care Act added 12 years to the Medicare trust fund's life, extending it until 2029. But rising health care costs and the recent recession took a toll this year, as fewer workers contributed to the fund because of high unemployment.
Senate Budget Committee Chairman Max Baucus, D-Mont., said the report makes efforts to strengthen Medicare even more important.
"We must continue to fight for and protect the Medicare program to ensure it is as dependable for the next generation as it is for our seniors today," Baucus said in a statement.
With Medicare now accounting for 15 percent of the federal budget, the Republican-led House passed a budget that would cap program spending growth by changing Medicare from a program that pays for a defined set of health care benefits to one that pays a set subsidy toward private health insurance. Under that "voucher" scenario, beneficiaries would be responsible for any cost overruns.
The Congressional Budget Office found that 65-year-olds retiring in 2022 would devote about half of their monthly Social Security checks to health care costs under the House proposal. That's more than twice what they would pay under the current Medicare system, the analysis found.
Numerous polls have shown strong opposition to the House proposal, but in a statement Friday, Rep. Paul Ryan, R-Wis., the chairman of the House Budget Committee, continued to champion the plan, citing the trustee report as an impetus for change.
"Today's report yet again highlights the urgent need to save and strengthen our critical health and retirement security programs," Ryan said in a statement.
John Rother, AARP executive vice president, said savings equivalent to those sought in the Ryan plan could be obtained throughout the health care system by improving patient safety, reducing preventable hospital readmissions and encouraging delivery system reforms.
"If we are serious about addressing rising health costs, we cannot look only to Medicare for solutions," Rother said.
Information from the Associated Press was used in this report.