Medicare and Social Security “are on unsustainable paths” and will be insolvent within a few decades, according to this year’s annual report of trustees of the funds, released last week.
None of this is surprising. Even operating under rosy projections that incorporate the Affordable Care Act’s “unprecedented improvements in health care provider productivity” and private-sector technological advances that will boost efficiency (and no doubt they will) the Social Security trust fund would only have revenue to pay out three-quarters of promised benefits after 2033—three years earlier than last year’s report predicted.
According to the Committee for a Responsible Federal Budget, even when we discount the past two payroll tax holidays, Social Security is projected to run a $53 billion deficit in 2012 and a $937 billion deficit from 2013 through 2022.
The Medicare trust fund will be able to pay roughly 87 percent of its costs in 2024—the same estimate as a year ago when trustees moved the date up five years. Since 1970, Medicare trustees have predicted the end is near and then nearer. The program must soon face up to demographic realities: Americans are living longer and fewer workers are paying Medicare and Social Security funds per retired citizen.
Though, we should also be reminded, that there’s really no such thing as Medicare or Social Security trust funds, per se—at least not as one imagines a “fund” might look in the real world. Today’s taxpayers pay today’s retirees. Still, it is unlikely, unthinkable actually, that Washington wouldn’t meet its obligations to seniors. So we are left with few choices: Spending more of what we don’t have, cutting benefits, or reforming the system.
More out of pocket
You may believe that these annual warnings of impending disaster to two prized liberal institutions would have folks in Washington nervous. The Obama campaign did jump to partisan action, claiming that Republican presidential contender Mitt Romney supported a plan that turns Medicare “into a voucher program” (if only) and would force “seniors to pay thousands more out of pocket each year for their health care.” The reality is that doing nothing—as the administration proposes—means that the 75-year budget outlook at present value means an unfunded expenditure that would cost our children around $38.6 trillion.
In a letter to the Senate Budget Committee, in fact, the actuary at the Center for Medicare & Medicaid Services proffered a different set of more realistic circumstances—that the trustees are being far too optimistic with their projections. In the actuary’s scenario, wherein we discount next year’s imaginary 30 percent rate cut to doctors and Obamacare’s supernatural ability to hold down costs, there will be an additional $10 trillion unfunded obligation over that 75 years.
Speaking of Obamacare, Treasury Secretary Tim Geithner, never failing to take advantage of a crisis, went on to explain that, “One of the most important things we can do right now to preserve Medicare is to implement the Affordable Care Act fully and effectively.”
Problem is that double counting is not actual savings. Chuck Blahous of Mercatus Center at George Mason University, a trustee of the Social Security and Medicare programs appointed by President Obama, recently released a peer-reviewed study that finds the Affordable Care Act is “expected to add at least $340 billion and as much as $530 billion to federal deficits while increasing federal spending by more than $1.15 trillion over the same period and by increasing amounts thereafter.”
And the annual reports from the trustees of Medicare and Social Security are not going to get any better with time.