Funds for Medicare, Social Security May Run Out Later Than Expected

By John D. McKinnon and Rebecca Christie

Wall Street Journal, March 27, 2002

WASHINGTON -- Despite the recent recession, the outlook for Social Security and Medicare may have improved slightly, according to new, more optimistic assumptions about the country's economic future.

The programs' trustees -- mostly appointees of President Bush -- estimated that the Medicare trust fund would remain solvent until 2030, one year longer than previous estimates had projected, while the Social Security trust fund would gain three years of solvency, to 2041. Medicare provides a range of health benefits to the elderly and some disabled people, and Social Security mainly provides income to retirees and their families.

The new estimates mean that overhauling the programs -- a politically painful task -- becomes slightly less pressing for now, or at least doesn't become more pressing. That is good news for Republicans in the House, who have been reluctant to address plans put forward recently by a panel of Bush administration advisers examining how to fix Social Security's long-term funding problems. One of the panel's recommendations is to allow participants to control some of their retirement savings through private accounts.

The trustees cautioned that the improved forecast for the programs shouldn't become an excuse to delay action to shore them up. Both still face huge fiscal challenges. The Medicare hospital-insurance program, for instance, is projected to start running a deficit in 2016, the same as was predicted last year. Social Security's combined old-age and disability programs are projected to start running deficits in 2017, compared with last year's estimate of 2016.

When both entitlement programs are viewed in their entirety, they actually start to soak up tax money from other sources by 2010, trustees noted, because part of the Medicare program isn't counted in calculating the official deficit dates.

"This reprieve provides little comfort, as the programs continue to face substantial financial challenges in the not-too-distant future that need to be addressed at the earliest opportunity," warned Treasury Secretary Paul O'Neill.

Labor critics said the report shows the administration in retreat on partial privatization of Social Security accounts. "This year's report presents a very different picture than the gloom-and-doom scenarios privatization proponents have used to justify their calls for drastically restructuring the program," AFL-CIO President John Sweeney said in a statement. "To truly address the needs of workers, Congress and the president should take privatization off the table and get down to the real business of strengthening Social Security for future generations."

The new estimates are less likely to quell the debate over Medicare, which remains a hot political topic. Tommy Thompson, secretary of health and human services, which oversees Medicare, said the report shouldn't slow momentum for change, particularly among lawmakers of both parties who have promised a Medicare prescription-drug plan. Offering beneficiaries prescriptions would boost costs significantly. "I don't think they're going to want to go back home and campaign without delivering," he said. "This may be the most propitious time for acting."