WASHINGTON (Reuters) – U.S. Social Security payments will exceed receipts this year for the first time in 27 years partly because of the impact of the recession but the long-range health of the program was little changed from last year, a government report said on Thursday.
However, prospects for another major entitlement program brightened significantly from last year as a result of cost cuts resulting from healthcare reform legislation, the report said.
The Medicare hospital trust fund is not projected to exhaust its funds until 2029, 12 years later than forecast last year, according to an annual report on the two programs.
Social Security is set to run a $41 billion deficit excluding interest income due to the downturn and corrections of excess revenue credited to trust funds in past years, the first shortfall since 1983, the trustees of the program said in the report.
Over the long term, the program that was benefiting 53 million Americans at the end of 2009 was due to exhaust its reserves in 2037, the report said, the same date as was projected in last year's assessment.
Social Security benefits are funded by taxes on workers and excess revenues are placed on reserve for the program's future needs.
While the current working population is sufficient to support benefits to retirees, an aging population will at some point need to start drawing on reserves. When reserves are exhausted, revenues from taxes paid by working Americans will be sufficient to pay for only about 75 percent of scheduled benefits, the trustees' report said.
HEALTH SAVINGS
The report said cost savings to the Medicare program would come through reductions in projected payment increases to hospitals and healthcare providers in coming years. However, over the past several years, Congress has regularly blocked cuts in planned Medicare payments to physicians.
Health and Human Services Secretary Kathleen Sebelius acknowledged the administration would need to strike a balance between the controversial pay adjustments, which could drive some healthcare providers away from the Medicare program, and the need to reduce costs to ensure the long-term health of the program.
The funds' trustees urged lawmakers to address the looming financial problems of the programs soon. In addition to Sebelius, trustees include Treasury Secretary Timothy Geithner and Labor Secretary Hilda Solis.
The Medicare report acknowledged the softening recovery will add an additional obstacle to the financial health of the programs. The report assumed a return to full employment will not happen until 2017, two years later than projected last year.
After a painful recession, the massive U.S. budget deficit, which is expected this year to top the record $1.41 trillion hit in 2009, and the $13 trillion national debt have become political hot buttons that will be leading issues going into November's congressional elections.
The annual report is usually released in April or May but the trustees delayed publication to study how the fate of the programs would be affected by recently passed healthcare reform legislation.
A blue ribbon bipartisan commission is due to make recommendations by December about how to improve the long-range state of U.S. finances, and is expected to offer thoughts on how to put the two programs on sounder long-term footing.
(Reporting by Mark Felsenthal and Glenn Somerville; Editing by Andrea Ricci)