Trustees’ Report: Medicare and Social Security Trust Funds Will Run Out by 2026

The Medicare Board of Trustees have released their annual report updating the status of Social Security and Medicare, the nation’s largest entitlement programs. The good news? It’s the most hopeful document the Trustees have released in years. Due to Obama’s cuts to Medicare and slowing growth in health care costs, Medicare’s trust fund is expected to last until 2026, two years longer than previously projected. The bad news? Oh, where to begin.

Firstly, even the goods news we mentioned earlier really isn’t’ all that good. As they are apt to do Obama Administration officials jumped on the news as further evidence that Obamacare is working.

Image courtesy of DonkeyHotey

“The Medicare report demonstrates, once again, the importance of the Affordable Care Act, which has strengthened Medicare’s finances by reigning in costs,” Treasure Secretary Jack Lew said. But Trustees of Medicare quickly slammed on the brakes, urging a more cautious approach to the numbers.

“I think that such an interpretation would be a mistake,” said Robert Reischauer, a public trustee of Medicare, in response. “Notwithstanding the fact that I’m cautiously optimistic that the slowdown [in health costs] will continue. . . Medicare’s projections involve a lot of uncertainty.”

That uncertainty revolves around a lot of things, but namely, whether doctors will be able to survive the cuts in reimbursement rates made by Obamacare. What Jack Lew and other Democrats are actually touting about Obamacare is that it reduces the amount Medicare pays doctors. That’s it. There’s no real reforms to bend the cost curve, no realignment of incentives to reduce overutilization, no innovations in delivery. It’s just a cut in rates coupled with a hope that doctors will survive. As Sarah Kliff writes for the Washington Post:

The Affordable Care Act’s reductions are more certain [than a continued slowdown in health care costs]; they are, after all, written into law. Still, there has been skepticism about whether doctors and hospitals can actually deliver on those changes — or whether they will find the new financial restraints too onerous, and clamor for a reversal from Congress.

In other words, get ready for “doc fix” part deux.

Second, a simple glimpse at the document reveals that while slightly more positive, the Trustees are still a down in the dumps bunch. The report is rife with ominous phrases like “trust fund reserve depletion,” “negative actuarial balance,” “unfunded obligation,” and “unsustainable path.” Eek.

Unfortunately, the Trustees have every reason to be pessimistic. Philip Klein reports for the Washington Examiner:

“Under the trustees’ “infinite horizon” estimates that project the cost of Social Security over time in present dollars, the program is running a long-term deficit of $23.1 trillion.

When it comes to Medicare, the outlook is even grimmer, because the demographics of an expanding older generation, which challenge the finances of Social Security, interact with rising health care costs.

Over time, the trustees project the hospital fund has $3.5 trillion in unfunded obligations, Part B will require $25 trillion in general revenue to finance, and Part D – passed by a Republican Congress and signed by Bush – will require an injection of $14.4 trillion. All told, Medicare will run $42.9 trillion short. Combined with Social Security, the long-term deficit of the two programs is $66 trillion.”

In other words, something must be done, and soon. That’s a sentiment prevalent throughout the 254-page report.

“The Trustees recommend that lawmakers address the projected trust shortfalls in a timely way in order to phase in necessary changes and give workers and beneficiaries time to adjust,” the report says. “Implementing changes soon will allow more generation to share in the needed revenue increases or reductions in scheduled benefits.”

Medicare and Social Security are clearly unsustainable in their current forms. They take in far too little money in revenues and dole out far too much in benefits. The result of this clear imbalance is that young adults may end up paying into a program their entire life only to see reduced benefits in old age. And the longer Democrats stall the necessary changes the worse things will get.