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WASHINGTON – The Medicare trust fund will be exhausted by 2017, two years earlier than originally projected, according to the annual report by Medicare Trustees.
Each year the Trustees of the Social Security and Medicare trust funds report on the current and projected financial status of the two programs. In their 2009 report, "projected long run program costs are not sustainable under current program parameters," they said.
Medicare's financial difficulties are much more severe than those confronting Social Security. While both programs face demographic challenges, the report notes, rapidly growing healthcare costs also affect Medicare.
“The longer we wait to address the long-term solvency of Medicare ... the sooner those challenges will be upon us and the harder the options will be,” said Timothy Geithner, Treasury Secretary and the chief Medicare Trustee.
Underlying healthcare costs per Medicare enrollee are projected to rise faster than the earnings per worker on which payroll taxes and Social Security benefits are based. Medicare's annual costs were 3.2 percent of the Gross Domestic Product in 2008, equivalent to $468 billion, or about three-quarters of Social Security's. They are projected to surpass Social Security expenditures in 2028 and reach 11.4 percent of the GDP in 2083.
Health and Human Services Secretary Kathleen Sebelius, who serves as a Trustee, said the report should serve as a "wake-up call" for everyone who is concerned about Medicare.
"Just as families, communities and businesses are struggling under the crushing burden of skyrocketing healthcare costs, so too are our Medicare Trust funds," said Sebelius. "This isn't just another government report. It's yet another sign that we can't wait for real, comprehensive health reform."
The Trustees’ report notes that the projected 75-year actuarial deficit in the Hospital Insurance (HI) Trust Fund is now 3.88 percent of taxable payroll, up from 3.54 percent projected in last year's report. The fund failed the Trustees' test of short-range financial adequacy, as projected annual assets will drop below projected annual expenditures within 10 years – by 2012.
The fund also failed the long-range test of close actuarial balance by a wide margin. The 2017 projected date of Trust Fund exhaustion is when dedicated revenues would be sufficient to pay 81 percent of HI costs. The report shows that projected HI dedicated revenues fall short of outlays by rapidly increasing margins in all future years.
