WASHINGTON The Bush administration issued a grim report on Tuesday on the financial outlook for Medicare and Social Security but said the condition of the programs had not significantly deteriorated since last spring.
The new report, like the one issued last April, said Medicare's hospital insurance trust fund would be exhausted in 2019, while Social Security's reserves would be depleted in 2041.
"Medicare poses a far greater financial challenge," said Treasury Secretary Henry M. Paulson Jr., the managing trustee of Medicare and Social Security.
The report may put pressure on the presidential candidates to say what they would do to rein in health costs and to shore up the programs, which serve more than 50 million people. The candidates have largely avoided these questions, but the next president will not be able to escape them.
The trustees said Medicare's hospital insurance trust fund would pay out more in benefits than it receives in taxes and other dedicated revenues this year. Social Security costs will exceed tax revenues starting in 2017, they said. The government will then have to draw on assets of the Social Security trust fund special government bonds to meet its obligations to retirees.
The first of the 76 million baby boomers began receiving Social Security retirement benefits this year. The number of beneficiaries will grow much faster than the number of workers paying taxes, creating financial difficulties for the program. Social Security would still receive tax revenues and could pay 78 percent of promised benefits if the trust fund ran out of money in 2041 as predicted, the trustees said.
The Democratic presidential candidates have set forth proposals to provide health insurance for all Americans, but have said less about how they would finance the costs of Medicare, for people who are 65 and older or disabled. Efforts to squeeze even modest savings from that program typically provoke a frenzy of lobbying on Capitol Hill.
Sen. Barack Obama, one of two contenders for the Democratic presidential nomination, said the trustees' report "should give Americans confidence that we can keep Social Security strong for future generations if we come together and address its real but manageable long-term cash flow issue."
"As president," Obama said, "I will reduce costs in the Medicare program by enacting reforms to lower the price of prescription drugs, ending the subsidies for private insurers in the Medicare Advantage program and focusing resources on prevention and effective chronic disease management."
Aides to Sen. Hillary Rodham Clinton, the other Democratic candidate, had no immediate comment on the report.
Sen. John McCain of Arizona, the presumptive Republican presidential nominee, has described Medicare as a "fiscal train wreck." Douglas Holtz-Eakin, a senior adviser to McCain, said the trustees' report reinforced the need to get health costs under control.
Medicare has a separate trust fund to pay for doctors' services and other outpatient care. The trustees foresee a steep increase in those costs, but said the trust fund would not run out of money because, under federal law, it has access to general revenue. In addition, beneficiaries' premiums can be adjusted each year to cover about 25 percent of the expected costs of this part of Medicare, known as Part B.
The standard premium for Part B has increased 64 percent in the last five years and is now $96.40 a month. Under the formula set by existing law, the premium will stay at that level in 2009 and 2010, the trustees said.
But the report, prepared by government actuaries and economists, said these projections were unrealistic because they assumed that Medicare payments to doctors would be cut by more than 10 percent in July and by an additional 5 percent in January 2009 and in each of the next seven years, for a cumulative reduction of about 40 percent.
In fact, Congress usually intervenes to block such cuts and, in recent years, has approved small increases for doctors, thus increasing the costs of Part B and beneficiaries' premiums.
In February, President Bush proposed Medicare savings of over $180 billion in five years. Congress rejected the proposal.
House Speaker Nancy Pelosi said the report reflected policy decisions made by Bush early in his administration. He inherited a budget surplus, but, rather than using it to shore up Social Security and Medicare, Pelosi said, he squandered much of it on "tax cuts for the wealthiest Americans."
Sen. Judd Gregg, R-N.H., said the report showed the looming crisis in entitlement programs "is not a phony issue, as some Democrats have stated, but a very real problem that is on our doorstep."