The recession has taken a big bite out of Medicare and Social Security, according to the latest reports from the trustees of both of those programs released this week. In both cases, rising unemployment, now at a 25-year high, has impacted the financial strength of the trust funds that finance benefits to retirees and disabled people.

Notably, the reports revealed that the Medicare Trust Fund will go into deficit two years sooner than last year’s report estimated. The Social Security Trust Fund will face a similar situation under current conditions by 2037, four years sooner than last year’s report projected.

This does not mean that those programs will be forced to close down or should be required to scale back benefits. What it does mean is that, if current economic conditions persist for years, the benefits those programs provide normally from their respective trust funds, which are made up of the annual hundreds of billions in surpluses from payroll taxes, will, at some distant point in the future, have to be supplemented directly by payroll taxes.

In her response to the news, Labor Secretary Hilda Solis told reporters that ‘the dual effect of the economy and unemployment has produced a downward pressure on the financial security’ of the Social Security program.

Treasury Secretary Timothy Geithner added, ‘The sooner we come together to make the difficult but achievable changes needed to strengthen the solvency of Medicare and Social Security, the more time we’ll give the American people to plan and to adjust, and the sooner we’ll be able to ensure that these vital programs will be as important for generations to come as they are today.”

Secretary Geithner is a trustee of the Medicare program and indicated that the reports signaled the vital importance of passing a health care reform package that controls costs and provides choices and universal coverage.

Right-wing opponents of the Social Security and Medicare programs are gleeful at the news. One example is the $1 billion endowed Peterson Group, whose sole purpose for existing is to exaggerate the financial difficulties of each, which is using the information to try to pressure Congress to cut benefits or eliminate the programs through privatization.

According to the National Committee to Preserve Social Security and Medicare (NCPSSM) privatization schemes passed under George W. Bush and arbitrary rules applied to Medicare’s funding have unnecessarily inflated the negative financial picture.

The creation of the Medicare Advantage program, for example, a privatized insurance plan, depletes some $15 to $16 billion annually from the Medicare Trust Fund. According to NCPSSM, ‘Medicare is paying private plans [in Medicare Advantage] an average of 13 percent more than it would cost to cover the same beneficiaries under traditional Medicare.’

President Obama has proposed eliminating these costly overpayments.

In addition, expensive privatized Medicare Part D plans have drained resources as well. Income adjusted premiums for this portion of Medicare, as President Obama has proposed, would also help save money.

‘At least some of the savings proposed in Medicare should be reinvested to improve the nation’s largest health care provider. We must seize this historic opportunity to improve the quality of care to all Americans, young and old alike,” said Barbara B. Kennelly, president and CEO of NCPSSM.

For its part, Social Security’s total assets surplus will remain intact for almost 30 more years.

On this point, AFL-CIO President John Sweeney remarked, ‘The Social Security system remains structurally sound. Radical changes are not necessary to bridge short-term revenue decreases or to address the program’s long-term solvency.’

Edward F. Coyle, executive director of the Alliance for Retired Americans, added that these new reports should not be used to promote ‘an ongoing ideological agenda to cut benefits to current and future retirees.’

In fact, according to the Center for Economic Policy Research, ‘It would be incredibly malicious policy to amplify the impact of these losses by cutting Social Security benefits, especially since people in these age cohorts already paid for these benefits through their Social Security taxes.’

As a candidate, President Obama argued that strengthening Social Security’s financial situation could be best achieved by raising the cap on payroll taxes. Currently, only income below about $100,000 per years is taxed for Social Security. In addition, he rejected raising the retirement age or cutting benefits in other ways.

On the Medicare issue, the President has repeatedly argued that Medicare will remain solvent only if health care reform puts measure in place that will control costs and provide universal coverage.

Labor movement leaders also argued that broad economic recovery that creates good-paying jobs will also ensure that both Medicare and Social Security can be revitalized financially.

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