Medicare Trust Fund To Last A Year Longer

The trust funds for Social Security and Medicare will last a year longer than previously estimated, trustees said Monday. That means 2041 for the Social Security trust fund to be exhausted and 2019 for Medicare.

In their annual report on the financial health of the government's two biggest benefit programs, the trustees said that slight reductions in projected benefits and slightly higher tax collections had extended the dates that the trust funds are projected to be depleted.

However, the trustees said both programs continue to face serious financial problems with the pending retirement of 78 million baby boomers. The report for the first time triggered a Medicare funding warning that will require President Bush to submit to Congress next year proposals for trimming Medicare costs.

The Medicare funding warning is triggered any time two consecutive trustees reports conclude that the amount of general revenue needed to finance Medicare will top 45 percent of the program's outlays. The trustees first made that determination last year.

It will require Mr. Bush to propose remedial action early next year. While Congress must consider the proposals, it is not required to act on them.

Lobbying groups for senior citizens have decried the warning mechanism, which was added to Medicare with passage of the prescription drug benefit in 2003.

They contend that it is no more harmful for Medicare to receive more than 45 percent of its funding from general revenue than for other government programs to receive 100 percent funding from general revenue. The other sources of Medicare funding are payroll taxes and insurance premiums.

President Bush once vowed to make overhaul of Social Security the top domestic priority of his second term. However, the proposal he put forward in 2005 to deal with the funding shortfall by creating personal savings accounts for younger workers went nowhere in Congress.

The trustees said that 2017, just a decade from now, is the date that Social Security will begin paying out more in benefits than it collects in payroll taxes.

For Medicare, the date when benefit payouts exceed tax collections is expected to occur this year.

Treasury Secretary Henry Paulson, who has engaged in months of talks with members of Congress, said the new report underscored a need for action.

"If we do not take action soon to reform Social Security and Medicare, the coming demographic bulge will jeopardize the programs' ability to support people who depend on them," Paulson said in releasing the report. "Reform is needed, and time is of the essence."

Paulson is one of three Bush Cabinet members who serve on the six-member panel of trustees for the two benefit programs.

As in past reports, the trustees warned that the financial situation facing Medicare is more dire than Social Security because of the rapid increase in health care costs.

The administration hoped Paulson, the former head of investment giant Goldman Sachs, would be able to revive Bush's stalled overhaul effort when he was tapped for the Cabinet post last year.

While Democrats and Paulson's aides say discussions are still under way, there have been no signs of progress after months of behind-the-scenes talks. Paulson has begun to sound less positive about the chances for a breakthrough.

In an interview last week, he said that if his effort doesn't succeed, he hopes the discussions will at least lay the groundwork for success after this administration leaves office.

With Democrats in control of Congress and Bush mired in an unpopular war, the president's political influence has been greatly reduced.

Some analysts said even the next president may decide to push entitlement reform into a second term, when the rising costs of baby boomer retirements are expected to send federal budget deficits soaring.