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While Social Security and Medicare trustees call for “legislative corrections” to the programs, Treasury Secretary Jack Lew said President Obama is “ready” to address the problems but opposes any “privatization” to Social Security.
“As the trustees’ reports have been indicating for a while now, these programs face long-term challenges. In fact, the projections in this year’s report for Social Security are essentially unchanged from last year and those for Medicare have improved modestly,” said Lew on Friday at an event announcing the release of the annual reports from the Boards of Trustees for the Social Security and Medicare Trust Funds.
“The president recognizes how essential reform is, and he’s determined to work on a bipartisan basis to put Social Security and Medicare on a stronger footing. For Social Security, the president is ready to address future shortfalls, and he has put forward a set of principles for reform. These principles underscore the need to find common ground to extend the life of the program and while making it clear that changes to Social Security that involve deep benefit cuts or privatization will be unacceptable.”
Without reform, the report warns that Medicare’s “projected date” of “depletion” is 2026 and Social Security would reach the same fate in 2033.
Health and Human Services Secretary Kathleen Sebelius appeared at the press conference alongside Lew, Social Security and Medicare Public Trustees Charles Blahous, Robert Reischauer and Carolyn Colvin, acting commissioner of Social Security and a trustee.
“Medicare continues to face considerable challenges, including an aging population. So we must continue to build on the progress we’ve made in the last few years, and that’s why the president’s 2014 budget lays out an additional $371 billion in savings to Medicare over the next decade,” Sebelius said.
“If those proposals are enacted by Congress, they will put Medicare on an even sounder footing for our children. Today’s trustees report is the latest demonstration that with smart reforms, we can secure Medicare for the future without slashing benefits.”
In their summary of the report, the Social Security and Medicare Boards of Trustees detail the need for legislative action to save entitlement programs for future beneficiaries.
“Neither Medicare nor Social Security can sustain projected long-run programs in full under currently scheduled financing, and legislative changes are necessary to avoid disruptive consequences for beneficiaries and taxpayers. If lawmakers take action sooner rather than later, more options and more time will be available to phase in changes so that the public has adequate time to prepare,” says the “message to the public” from the board of trustees.
“Earlier action will also help elected officials minimize adverse impacts on vulnerable populations, including lower-income workers and people already dependent on program benefits.”
In the fiscal year 2012, Social Security and Medicare “accounted for 38 percent of federal expenditures” and the trustees warn that both will “experience cost growth substantially in excess of GDP growth through the mid-2030s.”
This growth is attributed to “rapid population aging caused by the large baby-boom generation entering retirement and lower-birth-rate generations entering employment.”
According to the public trustees, “both the Social Security and Medicare programs face substantial financing shortfalls that require legislative corrections, but the implications are different for each one.”
Social Security requires “more far-reaching legislative measures” to maintain its solvency while Medicare is “projected to experience relatively greater cost growth over the long-range valuation period, posing greater strains for the federal budget as a whole due to the extent to which its financing depends on general revenues.”
The White House called the report “good news for seniors and taxpayers” since “the Medicare program will be solvent through 2026, nearly a decade longer than projected at the time of passage of the Affordable Care Act.”
“This is 2 years longer than projected last year. Their annual report also shows that the long run actuarial deficit in the Hospital Insurance Trust Fund – a measure of its long-term fiscal health – has been cut by more than 70 percent since enactment of the health care law,” wrote Jeanne Lambrew, deputy assistant to the president for health policy and Gene Sperling, the director of the National Economic Council and assistant to the president for economic policy on the White House blog.