Watch CBS News

Weakened Economy Threatens Social Security, Medicare

WASHINGTON (AP) — The government said Friday that a bad economy has shortened the life of the trust funds that support Social Security and Medicare, the nation's two biggest benefit programs.

The annual checkup said that the Medicare hospital insurance fund will now be exhausted in 2024, five years earlier than last year's estimate. The new report says that the Social Security trust fund will be exhausted in 2036, one year earlier than before.

The trustees for the trust funds said in their annual report that the worsening financial picture emphasized the need for Congress to make changes to avoid disruptive consequences in the future for millions of people who depend on health and pension benefits.

Treasury Secretary Timothy Geithner, who chairs the trustee's panel, said the new report underscored "the need to act sooner rather than later to make reforms to our entitlement programs. ... We should not wait for the trust funds to be exhausted to make the reforms necessary to protect our current and future retirees."

The trustees said that they moved the target date for the Medicare hospital trust fund to be exhausted from 2029 to 2024 because of a weaker economy, which means fewer people working and paying Medicare premiums into the fund, and continued increases in health care costs.

Last year's report had extended the life of the Medicare fund by 12 years to reflect the savings that were included in the massive overhaul of health care that President Barack Obama got Congress to pass in 2010. Without the changes in health care law, the administration said the Medicare trust fund would be exhausted in 2016.

The savings in the health care legislation are still included in the trustees' projections but have been updated to reflect data on the economy and health care costs over the past year.

Many experts believe that the savings included in Obama's health care program will never be achieved because they include deep cuts in payments to doctors that Congress has routinely waived and other cost savings that will be difficult to realize.

The Social Security trust fund was projected to be exhausted in 2036, compared with last year's projection that it would be depleted in 2027.

(© Copyright 2011 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.)

View CBS News In
CBS News App Open
Chrome Safari Continue
Be the first to know
Get browser notifications for breaking news, live events, and exclusive reporting.