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 issue a report on their financial health.

With respect to Medicare, a number of legislative improvements, contained in the Balanced Budget Act of 1997, have been implemented since last year's report. Today, our report shows that the exhaustion date for the Hospital Insurance program has been pushed back to 2008, and it also indicates that the 75-year actuarial deficit has been substantially reduced. These outcomes are a direct result of the enactment of the Balanced Budget Act and the recent strong performance of the economy.

However, the long-term problem for Medicare, though not as severe as we projected last year, is still substantial. As a result of the aging of the population, we are still projecting that significant cost pressures will develop relatively soon in the next century. Last year, we recommended the creation of an advisory group to review the complex issues underlying these expected cost increases, and to help fashion solutions. In this regard, we are pleased to note that the BBA also established the National Bipartisan Commission on the Future of Medicare, and that this Commission has begun its work. The improvement in the 75-year outlook for Medicare makes a strong contribution toward the work of the Commission.

The BBA bought us time, but it is vital that we take the necessary steps to restore long-term solvency to the Medicare program as quickly as possible.

For the combined Social Security trust fund the short-run situation is different -- it is solvent in the near term, but we project that it will be exhausted in 2032, 3 years later than projected last year. Thus, there is no immediate crisis in this program, but, as the report shows, and as the President and others have indicated, the long-range financing deficit in the Social Security program needs to be addressed in a timely way, so that retirement planning can be adjusted in response to program changes. Extensive public discussion and analysis of the practical implications of alternatives is essential for developing the broad support that will be needed to enact any Social Security legislative reform. The President's plan to facilitate this dialogue will be very helpful in accomplishing that objective.

The health of both the Social Security and Medicare trust funds is important for the millions of Americans who depend on these programs today, and for the millions who will depend on them in the future. Preserving and modernizing Social Security and Medicare is not a partisan issue. We will be able to construct acceptable solutions to the longer-term challenges of both programs only if we join together and act on a bipartisan basis.