Medicare may be harder to fix than Social Security

The U.S. Medicare system, which provides health care to the elderly, faces more serious shortfalls in coming years than Social Security does, and its problems are much harder to fix, a Treasury Department official said on Friday.

“Much more analytical groundwork needs to be done and experience gathered before we as a society can begin to coalesce around options that completely address the unsustainable growth in Medicare and other health care expenditures,” Mark Warshawsky, Treasury’s assistant secretary for economic policy, said in prepared remarks.

"The same is not true of Social Security,” he told the conservative American Enterprise Institute think tank.

Rising health care costs and the aging of the baby boom generation has pushed Social Security and Medicare to center stage in U.S. politics.

U.S. President George W. Bush has made overhauling Social Security his lead domestic initiative and has launched an aggressive campaign to promote his proposal to allow younger workers divert part of their retirement savings into private investment accounts.

Still, some economists have argued that Medicare is a far more pressing problem for the country. According to data released this week, the Medicare hospital insurance trust fund will be depleted in 2020, while Social Security will exhaust its assets in 2041.

In his speech, Warshawsky said the Bush administration “is aware of the important issues with Medicare’s finances” and was seeking to temper high health care costs by pressing health savings accounts and more widespread use of health care information technology.

“Medicare finances are projected to get out of hand not only because of an aging society, but more importantly because of rapidly increasing health care costs,” he said. “High health care cost growth is not a Medicare-specific problem, but an economy-wide problem.”

In contrast, Warshawsky said, Social Security’s ills were clearly identified and therefore more easily remedied.

“Fortunately, the current untenable situation of Social Security is fixable,” he said.

Opponents to Bush’s Social Security overhaul plan, including Democrats and the retirement group AARP, have warned against increasing the federal debt as money is shifted toward private accounts. They also say benefit cuts would be likely. 

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