The trust fund for Medicare’s Hospital Insurance is estimated to run out of funds during 2024. This is five years sooner than a report released in 2010 predicted. Spending on Social Security and Medicare is expected to increase at a rate of fifty percent faster than the economy between 2007 and 2030.
Medical costs are increasing and so are the numbers of baby boomers retiring. This gives the program a projection of costing “11.3% of GDP in two decades. That is compared to 2007’s 7.4%. The cost this year is going to be 8.5% or 37% of spending without interest.
The exhaustion of the Security fund will mean that the annual payroll taxes utilized to pay the programs costs will only be enough to take care of approximately three-fourths of the retirement benefits that are paid to seniors annually. Social Security is set to run out during 2036. The exhaustion of the fund that covers hospital care means that revenue from the taxes for Medicare will cover ninety percent of expenses annually at first. By the middle of the century it will only cover seventy-five percent but that is expect to increase to eighty-eight percent by the year 2085.
Social Security and Medicare are now paying out more than they are taking in. Budget deficits are increased as the government has to utilize other funds to make up the difference. One third of spending by the federal government is made up of these tow programs. The retirement of Baby Boomers will be the largest factor in the increasing costs of these two programs during the next two decades.
Treasury Secretary Timothy Geithner has said that reforms need to take place now instead of waiting for the programs funding to be exhausted. The deficit for Social Security is currently $49 billion and there is expected to be a deficit during 2011 of $46 billion as a result of the weakened economy. Once the trust funds are depleted the programs will be able to use tax revenue to pay a portion of the benefits.
Social Security’s Disability Insurance began out running its income during 2005. The balance of the trust fund for this program is expected to be one hundred percent less than the annual cost of the program by 2013 and by 2018 they are expect to be completely exhausted. Based on current projects reform has to be put into place now in order to prevent the exhaustion of funds for Medicare and other assistance programs.