Social Security will run through its trust fund by 2033 and Medicare by 2026, according to the annual report from trustees of the funds.
Believe it or not, the Medicare date is an improvement from last year's estimate of 2024, thanks to a deceleration of overall healthcare spending growth, particularly on skilled nursing care, as well as lower projected costs for Medicare insurance plans.
Retiring baby boomers are the major source of stress for the two entitlement programs. Almost 10,000 baby boomers are hitting the retirement age (65 to 67 for Social Security and 65 for Medicare) each day and so qualifying for benefits.
Republicans and Democrats have been unable to agree on how to fix the finances of the two programs, which accounted for about 38 percent of federal spending last year.
Treasury Secretary Jacob Lew, the chairman of the trustees, said President Barack Obama is committed to working with Congress to repair both programs.
"Protecting Social Security and Medicare is one of the most significant challenges we face today as a nation. And it is a challenge that we can and must meet," he told reporters Friday.
But Obama has said he's unwilling to raise the Medicare eligibility age.
Not surprisingly, Republicans voiced their concern about the situation as well Friday. House Budget Committee Chairman Paul Ryan said the programs need to be fixed,
The Hill reports.
"Today's report is yet another reminder that Medicare and Social Security are in great danger. We need to protect and strengthen these critical programs. And we must take action now, so we can keep our promises to current seniors and future retirees," said the Wisconsin Republican's spokesman William Allison.
The basic disagreement is that Democrats don't want to cut benefits and Republicans don't want to raise taxes to pay for them.
If the trust fund reserves run out, the two entitlement programs won't collapse but hefty benefit reductions will ensue. For Social Security beneficiaries that would mean a 25 percent decrease and for Medicare beneficiaries a 13 percent decrease, according to the
Associated Press.
In March, Andrew Biggs of the American Enterprise Institute, Eugene Steuerle of the Urban Institute and John Shoven of Stanford University participated in
a symposium on how to deal with Social Security and Medicare's structural problems.
All three agreed that increased longevity demands that the programs create incentives for people to work longer. Steuerle advocated partial retirement plans to encourage workers to keep going even after they can start earning Social Security. The minimum age for Social Security collection is now 62.
Biggs advocates dropping the 12.4 percent payroll tax for workers older than 62, giving them a good reason to keep working after that age. The shortfall in tax revenue would be made up by the increase in taxes these people would pay on their income.
Shoven objects to the "Medicare Secondary Payer" requirement, which means workers over 65 have to purchase health insurance from their employers if it's available, rather than dip into Medicare. That amounts to a 30 percent tax on these workers, he said.
Instead, Shoven recommends installing Medicare as the primary insurance for senior citizens even if they're in the work force. That would goad them into staying there, he says.