Social Security and Medicare: An honest debate, now

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The trustees overseeing Social Security and Medicare delivered a bleak report Friday on the programs’ long-term prospects. They projected that rising costs will render the Medicare trust fund for hospital care insolvent in 2024, five years sooner than expected. And with the sluggish economy reducing payroll tax revenue, they said, the Social Security trust fund will be exhausted in 2036, one year earlier than predicted. The day of reckoning won’t come for either program for more than a decade, which some advocates say is why Congress shouldn’t do anything about them now. Yet no solution will be possible until Republicans and Democrats start having an honest debate about the options.

The long-term problems in the two programs stem partly from demographics. The ratio of workers (who pay the payroll taxes that fund Social Security and Medicare) to retirees is shrinking, thanks to the aging baby boom generation. An equally significant problem for Medicare, though, is the rapid rise in healthcare costs. The healthcare reform law should slow that increase, the report says, but it is unrealistic to think that it can hold down payments to doctors as much as its backers expect.

The message from the report is the same as in past years: The fiscal problems in these programs are real, and the longer Congress waits to deal with them, the harder they will be to solve. Fixing the projected long-term shortfall in Social Security would require changes equal to a 17% increase in Social Security taxes or a 14% cut in benefits; fixing Medicare’s hospital insurance program would require the equivalent of a 21% hike in Medicare taxes or a 17% cut in benefits. The magnitude of those changes will only increase if Congress waits to act.


When either party has tried to tackle these issues, however, the other has responded by playing to seniors’ fears instead of addressing the problem. For example, after House Republicans offered a budget for the coming fiscal year that gradually transformed Medicare from a health insurance program into an insurance subsidy program, Democrats blasted them for seeking to “end Medicare as we know it.” Yet Democrats know full well that Medicare isn’t sustainable in its current form. The healthcare law they championed would transform the way Medicare providers are paid and their services delivered, ameliorating but not solving the program’s fiscal woes. Republicans are seeking to repeal that law in part because of its Medicare provisions. But the trustees credited the law with pushing back insolvency by seven years.

Similarly, after several bipartisan commissions on deficit reduction called for Congress to fix Social Security’s long-term fiscal problems, the program’s liberal defenders argued that lawmakers should leave it alone because it’s not contributing to the deficit. That’s akin to saying that residents of New Orleans don’t have to worry about a flood cascading south on the Mississippi River because it hasn’t reached them yet. Lawmakers should cut the demagoguery, acknowledge the problems in the programs and start debating how to solve them.