FROM THE OFFICE OF PUBLIC AFFAIRS

Today, the Boards of Trustees of the Medicare and Social Security Trust Funds met to complete our annual review of the financial status of the trust funds and to forward the reports to Congress.

Beyond the statistics and actuarial tables, the clear message from the Trustees is that Social Security and Medicare need to be reformed and strengthened at the earliest opportunity. The long-term financing gap for Social Security and Medicare is slightly larger this year than it was projected to be last year. Absent reform, over 15% of GDP-nearly 1 out of every 6 dollars in the economy--will be devoted to these two programs by 2076. The earlier action is taken to address this prospect, the easier it will be to strengthen these essential programs for generations to come.

The projected near-term financial conditions of the Trust Funds have improved slightly since last year's reports, due mainly to assumed additional growth in underlying economic productivity. This reprieve provides little comfort, as the programs continue to face substantial financial challenges in the not-too-distant future that need to be addressed at the earliest opportunity. The longer we wait, the more difficult our choices will be in the future.

Let me talk a bit more about Medicare. I am pleased that the Trustees' have, for the first time, prepared a single report for the Medicare program. The best way to understand the full implications of the financial situation of the Medicare program is to consider its two components (HI and SMI) together.

Medicare's share of GDP is expected to more than triple by 2076. By comparison, projected Medicare income will barely double during that time. Medicare will eventually be larger than Social Security. The financing gap for the Hospital Insurance program is larger than the gap for Social Security, and the HI Trust Fund will become insolvent 11 years sooner than the Social Security Trust Funds. HI tax income will fall short of outlays beginning in 2016, as we projected last year. Adopting new benefits without addressing the underlying cost drivers will only add to Medicare's unsustainable financial problems.

We are facing the potential for extensive program cuts or large infusions of general revenue and substantial increases in beneficiary premiums if we don't act soon to reform the program. I continue to believe that there is tremendous potential for improvements in the health care sector, especially for those who depend on Medicare. The problem of medical errors is just the tip of the iceberg of systemic problems, which, if resolved, could significantly improve the quality of health care and help to reduce costs. Addressing these cost drivers will allow us to modernize the program to include the President's prescription drug plan and better meet seniors' needs.

Turning to Social Security, the primary problem remains - the program is substantially out of long-term balance because of the impending retirement of the baby boomers and increases in longevity. To support Social Security's outlays in 2076 will require more than a 50 percent increase in payroll taxes over today's rates.

We must take action to ensure Social Security is safe and secure for this generation and for future generations. This past fall, the President's Social Security Commission released its final report that showed how personal accounts can be an important part of the solution to strengthening Social Security. We must work now to preserve and protect Social Security, so we keep our commitment to current seniors, and meet the needs of our children and grandchildren.

It is my hope that with the constructive leadership provided by this Administration and Members of Congress we will create the necessary climate to restore long-term health to these programs, and do it very soon.