While the Obama Administration ratchets up support for government-run healthcare, which would be a new entitlement program, the government trustees who monitor the nation’s two largest entitlement programs, Medicare and Social Security, have reported that they are both less than a decade away from insolvency. 

The current economic crisis has reduced revenues for Medicare and Social Security far below previous projections.  According to a May 13, 2009 Washington Post article, the trustees’ report “predicts that the trust fund from which Social Security payments are made will be unable to pay retirees full benefits by 2037, four years earlier than forecast a year ago,” and that the “Social Security trust fund will begin to spend more money than it takes in through tax revenue in 2016, one year sooner than predicted a year ago.”  The 2007 report predicted the fund would last an additional year, while last year’s report predicted no change.

According to the Post, Medicare’s financial health “deteriorated less sharply in the past year than Social Security’s, but it remains the more urgent problem.  The trust fund that pays for hospital care under Medicare is now predicted to run out of money in 2017, two years earlier than forecast a year ago.”

$1 trillion was spent on the two programs last year which accounted for more than one-third of federal budget expenditures.  This figure is bound to increase in coming years.  According to analysis released on May 29, 2009 by USA Today, Social Security will have an additional “1 million to 2 million beneficiaries a year from 2008 through 2032, up from 500,000 a year in the 1990s,” while more than one million citizens annually will enroll in Medicare beginning in 2011.

Administration officials have stated that possible solutions to the problem could include raising Social Security payroll taxes and reducing benefits. 

It will be fascinating to observe how Democratic leaders in the House and Senate react to this news.  Only a few years ago, when the Bush administration pointed out the dangers of impending insolvency of the two programs, certain Congressional leaders dismissed that call to action.  In a May 10, 2005 press release, then-Rep. and now House Speaker Nancy Pelosi (D-Calif.) commented on the Social Security debate that took place under President Bush, stating, “There is no Social Security crisis.”  In addition, then-Senate Minority Leader Harry Reid (D-Nev.) was quoted in a May 2, 2006 Seattle Times article saying, “…despite White House scare tactics, Social Security remains sound for decades to come.”

Regardless of how it is fixed, work to address the solvency of these programs is sorely needed.  Congress and the administration need to treat sustainability in Medicare and Social Security as their highest priority.