WASHINGTON - The trust fund for Social Security will be depleted in 2040, a year before expected, and Medicare will exhaust its trust fund reserves just 12 years from now, trustees for the programs said Monday.
Their annual report showed deterioration in the financial condition of both of the government's two largest benefit programs.
A year ago, the depletion of the Social Security trust fund had been projected to occur in 2041 and the Medicare hospital insurance fund in 2020.
The trustees, who include the head of the Social Security Administration and three members of President Bush's Cabinet, painted a sober assessment of the health of the two programs in advance of the looming retirements of 78 million baby boomers.
"We do not believe the currently projected long-run growth rates of Social Security or Medicare are sustainable under current financing arrangements," the trustees said in this year's report.
Bush's efforts last year to overhaul Social Security went nowhere in Congress. Even members of his own party refused to support the benefit cuts that would have accompanied the establishment of private accounts for younger workers.
Treasury Secretary John Snow, who is the chairman of the trustees' panel, told a news conference that the country faced a "looming fiscal crisis as the baby boom generation moves into retirement." He said the administration stood ready to work with Congress to come up with a solution.
"The serious concerns raised by the trustees' reports demand the attention of America's policymakers and the public," Snow said.
Bush, facing bleak prospects for winning approval for any changes in an election year, called in his State of the Union address for creation of a bipartisan panel to study the issue and come up with recommendations, just the latest in a number of commissions that have examined the programs.
While the depletion of the reserves built up over past years is projected to occur in just 12 years for Medicare and 34 years for Social Security, both programs will face financing issues much sooner at the point that the amount paid out each year exceeds the amount the government collects to fund them.
For Medicare, that occurred for the year of 2004. However, the program is projected to be in the black again before crossing over to paying out more than it takes in again.
For Social Security, the point at which the program will pay out more in benefits than it takes in will occur in 2017, the trustees projected, the same as in last year's report.
The trust funds contain the equivalent of government IOUs. To raise the actual cash to meet obligations, the government must either borrow more money from the public by issuing marketable Treasury securities, raise taxes or cut spending in other programs.