Bad forecast for Medicare, Social Security

Medicare, the U.S. health insurance program for the elderly and disabled, and the Social Security trust for the disabled and retirees are running out of money sooner than the government had projected.

Medicare won't have sufficient funds to pay full benefits starting in 2024, five years earlier than last year's estimate, federal officials said Friday in its annual report. Social Security's cash to pay full benefits runs short in 2036, a year sooner than the 2010 projection.

Both forecasts were affected by a slower-than-anticipated economic recovery, the government said.

"Projected long-run program costs for both Medicare and Social Security are not sustainable under currently scheduled financing, and will require legislative corrections if disruptive consequences for beneficiaries and taxpayers are to be avoided," according to the report summary.

The 2010 health-care overhaul backed by Democrats extended the life of Medicare, but more must be done to shore up the program's long-term funding, Treasury Secretary Timothy Geithner said in a statement distributed with the report.

"If action is taken sooner rather than later, more options and more time will be available to phase in changes so that those affected can adequately prepare," he said.

When Medicare and Social Security funds run short, they will pay less in benefits rather than stop paying entirely. Social Security would have to cut payments by 23 percent, while Medicare would reduce by 10 percent what it pays hospitals and other inpatient providers.

Congress is debating potentially sweeping changes in the federal budget as part of a deal to raise the government's $14.3 trillion debt limit, which the Treasury Department said will be needed by Aug. 2.

Republicans demanding the deficit be cut have proposed privatizing Medicare by giving individuals a subsidy to buy coverage from private insurers. Lawmakers such as House Budget Committee chairman Paul Ryan, Republican of Wisconsin, said the forecasts were justification for action.

"Leadership is required from both sides to ensure that Medicare and Social Security are saved for current seniors and strengthened to meet the need of future generations," Ryan said.

Democrats, who have resisted changes to Social Security, said the analysis shows there's time to respond.

"The current situation does not necessitate rushed or severe action," said Senate Finance Committee chairman Max Baucus, Democrat of Montana. "We must continue to protect the Social Security benefits our seniors count on."