Will there be Social Security or Medicare after 2016?

Social Security and Medicare finances worsen
May 12th, 2009 @ 3:01pm
By MARTIN CRUTSINGER
AP Economics Writer

WASHINGTON (AP) - The financial health of Social Security and Medicare, the government's two biggest benefit programs, have worsened because of the severe recession, and Medicare is now paying out more than it receives.

Trustees of the programs said Tuesday that Social Security will start paying out more in benefits than it collects in taxes in 2016, one year sooner than projected last year, and the giant trust fund will be depleted by 2037, four years sooner.

Medicare is in even worse shape. The trustees said the program for hospital expenses will pay out more in benefits than it collects this year and will be insolvent by 2017, two years earlier than the date projected in last year's report.

The trust funds _ which exist in paper form in a filing cabinet in Parkersburg, W.Va. _ are bonds that are backed by the government's "full faith and credit" but not by any actual assets. That money has been spent over the years to fund other parts of government. To redeem the trust fund bonds, the government would have to borrow in public debt markets or raise taxes.

Treasury Secretary Timothy Geithner, the head of the trustees group, said the new reports were a reminder that "the longer we wait to address the long-term solvency of Medicare and Social Security, the sooner those challenges will be upon us and the harder the options will be."

Geithner said that President Barack Obama was committed to working with Congress to find ways to control runaway growth in both public and private health care expenditures, noting the promise Monday by major health care providers to trim costs by $2 trillion over the next decade.

However, Republicans pointed to the newly dire assessments as evidence the Obama administration has failed to come forward with actual entitlement reform to close the funding gaps.

"Instead of getting existing public programs in order right now, some are saying we should create a new government-run health insurance plan," Sen. Chuck Grassley, the top Republican on the Finance Committee, said in a reference to the administration's health care proposals. "When we can't afford the public health plan we have already, does it make sense to add more?"

House Republican leader John Boehner said the trustees report "confirms what we already knew: Our nation cannot afford to continue this reckless borrowing and spending spree."

The findings in the trustees report, the annual checkup given the two benefit programs, did not come as a surprise. Private economists had been predicting that the dates the programs would begin to pay out more than they take in and the dates the trust funds would be insolvent would occur sooner given the economic recession.

The deep recession, the worst the country has endured in decades, has resulted in a loss of 5.7 million jobs since it began in December 2007. The unemployment rate hit a 25-year high of 8.9 percent in April.

Fewer people working means less being paid into the trust funds for Social Security and Medicare.

The Congressional Budget Office recently projected that Social Security will collect just $3 billion more in 2010 than it will pay out in benefits. A year ago, the CBO had projected that Social Security would have a much higher $86 billion cash surplus for the 2010 budget year, which begins Oct. 1.

The trustees report projected that Social Security's annual surpluses would "fall sharply this year," then remain at a reduced level in 2010 and be lower in the following years than last year's projections. The report said that the Social Security annual surplus would be eliminated entirely in 2016, reflecting increased demands from the wave of 78 million baby boomers retiring.

That means Social Security will have to turn to its trust fund to make up the difference between Social Security taxes and the benefits being paid out beginning in 2016. The trustees projected the trust fund would be depleted in 2037, four years earlier than the 2041 date in last year's report.

At that point, the annual Social Security taxes collected would be enough to pay for three-fourths of current benefits through 2083. To tap the trust fund, the government would have to increase borrowing or raise taxes because Social Security bonds exist only as bookkeeping entries.

While the government is obligated to redeem those bonds, it has already spent the excess Social Security collections over the years to fund general government operations, providing the trust funds with IOUs.

While the smaller surpluses that will begin this year will not have any impact on Social Security benefit payments, the government will need to borrow more at a time when the federal deficit is already exploding because of the recession and the billions of dollars being spent to prop up a shaky banking system.

Medicare's condition is more precarious, reflecting the pressures from soaring health care costs as well as the drop in tax collections.

Obama on Monday praised the pledge by the health care industry to achieve $2 trillion in savings on health care costs over the next decade, but it was unclear how much help those pledges would be in achieving Obama's goal of extending coverage to some 50 million uninsured Americans. The administration is pushing Congress to pass legislation in this area this year, preferring to tackle health care before Social Security.

The trustees report is likely to set off renewed debate over Social Security and Medicare. Critics have charged that the Obama administration has failed to tackle the most serious problems in the budget _ soaring entitlement spending.

The administration on Monday revised its federal deficit forecasts upward to project an imbalance this year of $1.84 trillion, four times last year's record, and said the deficits will remain above $500 billion every year over the next decade.

Health Advice for Our Time.

An email was sent to me from a friend giving excellent medical advice...


Q: Doctor, I've heard that cardiovascular exercise can prolong life. Is this true?

A: Your heart is only good for so many beats, and that's it... don't waste them on exercise. Everything wears out eventually. Speeding up your heart will not make you live longer; that's like saying you can extend the life of your car by driving it faster. Want to live longer? Take a nap.


Q: Should I cut down on meat and eat more fruits and vegetables?

A: You must grasp logistical efficiencies. What does a cow eat? Hay and corn. And what are these? Vegetables. So a steak is nothing more than an efficient mechanism of delivering vegetables to your system. Need grain? Eat chicken. Beef is also a good source of field grass (green leafy vegetable). And a pork chop can give you 100% of your recommended daily allowance of vegetable products.


Q: Should I reduce my alcohol intake?

A: No, not at all. Wine is made from fruit. Brandy is distilled wine, that means they take the water out of the fruity bit so you get even more of the goodness that way. Beer is also made out of grain. Bottoms up!


Q: How can I calculate my body/fat ratio?

A: Well, if you have a body and you have fat, your ratio is one to one. If you have two bodies, your ratio is two to one, etc.


Q: What are some of the advantages of participating in a regular exercise program?

A: Can't think of a single one, sorry. My philosophy is: No Pain...Good!


Q: Aren't fried foods bad for you?

A: YOU'RE NOT LISTENING!!! ..... Foods are fried these days in vegetable oil. In fact, they're permeated in it. How could getting more vegetables be bad for you?


Q: Will sit-ups help prevent me from getting a little soft around the middle?

A: Definitely not! When you exercise a muscle, it gets bigger. You should only be doing sit-ups if you want a bigger stomach.


Q: Is chocolate bad for me?

A: Are you crazy? HELLO Cocoa beans! Another vegetable!!! It's the best feel good food around!


Q: Is swimming good for your figure?

A: If swimming is good for your figure, explain whales to me.


Q: Is getting in-shape important for my lifestyle?
A: Hey! 'Round' is a shape!


Well, I hope this has cleared up any misconceptions you may have had about food and diets.
AND.....
For those of you who watch what you eat, here's the final word on nutrition and health. It's a relief to know the truth after all those conflicting nutritional studies.

1. The Japanese eat very little fat and suffer fewer heart attacks than Americans.

2. The Mexicans eat a lot of fat and suffer fewer heart attacks than Americans.

3. The Chinese drink very little red wine and suffer fewer heart attacks than Americans.

4. The Italians drink a lot of red wine and suffer fewer heart attacks than Americans.

5. The Germans drink a lot of beers and eat lots of sausages and fats and suffer fewer heart attacks than Americans.

CONCLUSION

Eat and drink what you like.

Speaking English is apparently what kills you.

AND REMEMBER:
'Life should NOT be a journey to the grave with the intention of arriving safely in an attractive and well preserved body, but rather to skid in sideways - Chardonnay in one hand - chocolate in the other - body thoroughly used up, totally worn out and screaming 'WOO HOO, What a Ride!'

Insurance Lingo

Do you understand your insurance lingo? If you do, count yourself lucky (and good at word puzzles). If you don't...read on.

Familiarize yourself with these common terms.

Copay: The amount you owe for a medical expense at the time the service is rendered. For example, your policy might require a $10 co-pay per doctor's visit.

Deductible: The total amount you must pay for health expenses before your health insurance begins to cover costs. Generally, the higher your deductible, the lower your premium.

Exclusion: Medical services that are not covered under an insurance plan. For example, a plan may not cover plastic surgery or certain kinds of drugs.

Lifetime maximum benefits: The top amount a plan will pay over your lifetime. Maximums generally range from $1 million to $5 million.

Premium: The periodic amount you pay for your policy.

Provider: The person or facility that gives health-care services. Providers can include doctors, therapists, hospitals, labs and clinics.

Source:
All You magazine, August 29, 2008, Page 163