The Medicare and Social Security Trustees just released their annual reports, and the findings are predictably sobering. According to the latest calculations, Medicare will go bankrupt in 2024. Social Security will run out of money in 2033 -- three years earlier than last year's report projected.
Those dates may have seemed comfortably distant during the '80s and '90s, but in 2012 we can no longer deny that dire consequences are coming -- and soon -- if we don't take action to save these programs.
Stating the obvious, the report declares: "Lawmakers should not delay addressing the long-run financial challenges facing Social Security and Medicare. If they take action sooner rather than later, more options and more time will be available to phase in changes.”
The trustees are brutally clear about just what the consequences of delay will be. If we do nothing and let Medicare go bankrupt in 2024, the alternatives available then include an immediate 26 percent benefit cut for seniors or a 47 percent tax increase on workers.
For Social Security, bankruptcy in 2033 will mean that the Social Security trust fund will have only enough money to cover 75 percent of its benefits. That deficit could result in an immediate loss in benefits to about 14 million of the 56 million Americans who were on Social Security in 2009. Prospects for those just entering or soon to enter the workforce could be even more bleak. As Heritage Foundation expert David John eloquently puts it, "The people who will be hurt if nothing is done to fix Social Security are not unknown people of the future: They are the nation’s children and grandchildren of today."
As bad as these projections are, the trustees are careful to point out that the situation may be even worse than their estimates indicate. A variety of economic and policy factors could weaken Medicare even further. For instance, President Obama's health care law takes $500 billion away from Medicare and empowers a board of 15 unelected, unaccountable bureaucrats to make further cuts. Chief Actuary Richard Foster warns that imposing price controls would mean that "Medicare prices for hospital, skilled nursing facility, home health, hospice, ambulatory surgical center, diagnostic laboratory, and many other services would be less than half of their level under the prior law.” Furthermore, Foster cautions, “Medicare prices would be considerably below the current relative level of Medicaid prices, which have already led to access problems for Medicaid enrollees, and far below the levels paid by private health insurance.”
House Republicans have passed a budget plan that would prevent these drastic cuts by implementing structural reforms. Introducing premium support and competitive bidding to the system will make health care more affordable and accessible for future seniors without making any benefits changes for those age 55 or older or resorting to the price controls and tax increases that would result from Democratic proposals.
President Obama and congressional Democrats will attempt to score political points by falsely claiming that the Republican plan to save Medicare and Social Security will harm the programs. But their scare tactics are not nearly as frightening as the actual facts contained in the Trustees Report. The real threat to these vital programs is the status quo.