Tweaking Medicare, Social Security will buy one year

WASHINGTON - Fewer benefits, more taxes, and some accounting magic will buy an extra year of life for Social Security and Medicare, trustees of the government's two largest benefit programs said yesterday.

The oncoming crush of 78 million retiring baby boomers still will crash the Medicare trust fund by 2019 and the Social Security trust fund by 2041 unless Congress and the White House can agree on a way to save the programs, the officials said.

For the first time, Medicare hit a trigger that requires President Bush to send the House and Senate legislation to deal with Medicare's funding problems with his 2009 budget. Congressional Republicans, who crafted that trigger when they were in control of the House and Senate, immediately used the news to call for changes.

"Today's report reinforces the need for Congress to address runaway entitlement spending that will bankrupt future generations of Americans," said House Republican leader John A. Boehner of Ohio.

The Medicare warning is triggered any time two consecutive trustee 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.

Although Congress must consider the proposals, it is not required to act on them. Democrats now control the Congress, and they say GOP proposals to cut Medicare and Social Security are nonstarters.

"The so-called 45 percent general-revenue trigger for Medicare is nothing less than another way to choke off funds to seniors who need help," said Sen. Charles E. Schumer (D., N.Y.). "If there has to be a choice between preserving unnecessary tax cuts for the super rich or keeping good on our promise to 42 million Medicare beneficiaries, I'd choose the latter every time."

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

In their annual report on the financial health of the government's two biggest benefit programs, the trustees said that slight reductions in projected benefit payouts and slightly higher tax collections had extended the date that Medicare is projected to be depleted by a year.

Technical changes, such as using more recent information on disability rates for men, caused the change for Social Security from 2040 to 2041, trustees said.

Both programs will be in trouble soon, with the baby boomers about to enter the system. The first baby boomers begin retiring next year, accelerating benefit payments while reducing the number of workers paying into the system.

The trustees' report says Social Security could be saved with "an immediate increase of 16 percent in payroll tax revenues or an immediate reduction in benefits of 13 percent or some combination of the two."

It is unlikely that Congress is willing to tackle the issue.

The trustees said that 2017, just a decade from now, is the year 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.