The latest annual report on the prospects for Social Security and Medicare projects a $42.9 trillion shortfall over the next 75 years, at current levels of benefits and taxation.
The message Congress is taking away from the report is that there's still time to build bipartisan consensus for reform.
"I believe that we must get serious about addressing the long-term challenges to Social Security and Medicare," said House majority leader Rep. Steny Hoyer of Maryland, in a statement. "To that end, we must begin to lay the foundation for bipartisan action on this issue in the next Congress...."
At issue are soaring healthcare costs and the retirement of the baby boomer generation, which are driving entitlement costs to grow at a rate much faster than the US economy over the next several decades.
"Without change, rising costs will drive government spending to unprecedented levels, consume nearly all projected federal revenues, and threaten America's future prosperity," said Treasury Secretary Henry Paulson at a briefing Tuesday, releasing the report by the trustees for Social Security and Medicare.
Social Security's current annual surpluses will begin to decline in 2011, and slip into deficit in 2017. Over the next 75 years, that means finding an additional $4.3 trillion (in today's dollars) to pay for the program.
But the shortfall for Medicare comes sooner and is even more severe. While Medicare's annual costs were 3.2 percent of GDP in 2007, they are on track to surpass Social Security expenditures in 2028 and reach 10.8 percent of GDP in 2082.
To put it another way: It would take an immediate 122 percent increase in the payroll tax (to 6.44 percent) or a 51 percent reduction in program outlays to bring Medicare into balance, the trustees said.
As ordered by the 2003 Medicare prescription drug law, the trustees issued a "Medicare funding warning" that requires the next president to propose legislation to rein in Medicare spending. The warning, the third in as many years, is triggered whenever general tax revenues are needed to cover more than 45 percent of Medicare's costs over a projected seven-year period.
Last month, President Bush proposed legislation in response to the 2007 Medicare funding warning that would set higher premiums for higher income seniors. Representative Hoyer introduced the bill, as required by law, but said that he had "strong reservations." Aides for Speaker Nancy Pelosi say that no decision has yet been made about whether to go forward with the bill.
"The chances are pretty close to zero of significant legislation enacted this year that makes significant progress on either Social Security or Medicare financing," said Robert Greenstein of the liberal Center on Budget and Policy Priorities, in a briefing with reporters.
He adds that Congress has time to work out a solid, bipartisan reform on Social Security, but that the issues facing Medicare are more challenging. Recommendations by the Medicare Payment Advisory Commission (MedPAC), including halting "massive overpayments to private insurance companies in the Medicate Advantage program," have been stymied by healthcare industry lobbyists, he says.
Conservative analysts say it is "profoundly irresponsible" for Congress not to take action this year. "This is not a short-term fall in the stock market. This is serious stuff: The issue is how are we going to come up with $42.9 trillion over the next 75 years to pay for the promises on the books," says Robert Moffit, health policy expert with the Heritage Foundation.