Medicare, SS will run dry sooner than expected

WASHINGTON (AP)

The bad economy has shortened the life of the trust funds that support Social Security and Medicare, the nation's two biggest benefit programs, the government reported Friday.

The annual checkup said the Medicare hospital insurance fund will now be exhausted in 2024, five years earlier than last year's estimate.

The Social Security trust fund is expected to be exhausted in 2036, one year earlier than before.

Once the trust funds are exhausted, both programs can only collect enough money in payroll taxes to pay partial benefits, the report said.

More immediate bad news for seniors: After they've gone two years with no cost-of-living increase in Social Security payments, the trustees project a 0.7 percent increase for next year, a raise so small that it will probably be wiped out by higher Medicare Part B premiums for most beneficiaries.

"There can no longer be any doubt or denial: Our nation's Medicare and Social Security programs are unsustainable and will run out of money sooner than expected," said Senate Republican Leader Mitch McConnell of Kentucky.

Congress and the Obama administration are negotiating possible changes to Medicare and other benefit programs as part of a deal to increase the government's ability to borrow. The $14.3 trillion debt ceiling will be hit Monday, though Treasury officials are taking measures to put off an unprecedented default on government bonds until August, Treasury Secretary Timothy Geithner said.

Congress is putting off changes to Social Security, but Medicare, the government health insurance program for older Americans, is still on the table.

The longer Congress waits to fix the programs, the more likely it is that lawmakers will be forced to impose tax increases, deep benefit cuts, or both, to save them, the report said. By acting sooner, the trustees said Congress can impose gradual changes that reduce the impact on current beneficiaries and give future retirees time to prepare.