Social Security, Medicare Face The Age Of Austerity In a country that seems headed toward austerity, what will become of the government's two keystone entitlements, Social Security and Medicare? The public trustees of the two programs, Charles Blahous and Robert Reischauer, say they're worried that the day of reckoning is here.
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Social Security, Medicare Face The Age Of Austerity

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Social Security, Medicare Face The Age Of Austerity

Social Security, Medicare Face The Age Of Austerity

Social Security, Medicare Face The Age Of Austerity

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  • <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript

With Republicans taking over the House, and the president's deficit commission ready to report, the country's two biggest entitlement programs -- Medicare and Social Security -- are in the cross hairs.

The co-chairs of the deficit commission, Alan Simpson and Erskine Bowles, have proposed a series of dramatic changes to the two programs: among them, higher retirement ages and premiums, and lower benefits and more taxes for the wealthy.

Promises to "cut spending" are simple, resolute and popular on the campaign trail. But a deeper look at reform possibilities -- specifically for the country's ballooning entitlement programs -- raises complex questions.

Two men facing those questions right now are Charles Blahous and Robert Reischauer. Each was appointed by the president as a public trustee of Social Security and Medicare. And each tells NPR's Guy Raz that he's worried about an impending day of reckoning.

Trusting The Social Security Trust Fund

For starters, when it comes to Social Security, how long until the government's coffers run dry?

The Social Security trust fund should last until 2037.  But the money in that fund is actually spent by the government to buy Treasury bonds.  And when you think about it that way, the trust fund is more like a collection of IOUs the government has written to itself.

"A lot of people -- because there is this large Social Security trust fund on paper -- are tempted to believe that the financing problems are much further away than they actually are," Blahous says.

In a book out next month, Social Security: The Unfinished Work, Blahous writes about what he calls "the mounting cost of delay" in dealing with the long-term solvency of Social Security.

It's politically difficult to change or reduce benefits for people about to retire or who are already retired, Blahous argues.  And with baby boomers reaching retirement age in droves, each year without reform excludes millions of Americans from reform.

On Social Security: Act Now, Save Later

Blahous says the government can ease the pain by enacting reforms that are very gradual -- such as the Bowles-Simpson proposal to raise the retirement age from 67 to 69 over 48 years after 2020. "You can smooth out the changes so that any particular birth cohort or income group is not going to feel the changes terribly acutely," he says.

The problem, he says, is that politicians have little incentive to enact changes that won't be felt for 30 years.

"One of the great difficulties is that the benefits of correcting the system are not felt until after the political action is taken to reform it," Blahous says.

"But what I would say to someone sitting in office now is that if you act today, you could fix the system without changing benefits for those in retirement, without raising taxes and without actually having benefits in the future that are lower than they are today."

Blahous says that the next couple of months, as Washington digests the Simpson-Bowles recommendations, may be crucial.

"We're in a very critical period where we're going to see how much support [Simpson and Bowles] get from the White House," he says.  "We're going to learn a lot about where the president wants to go -- how much he really wants a Social Security deal."

And the Simpson-Bowles proposal, he says, is a good place to start.

"Any solution is going to have to look roughly like what they did."

On Medicare: Fewer Dollars, More Sense

Robert Reischauer, the other public trustee and a former director of the Congressional Budget Office, also says "small, measured, phased in adjustments" to entitlement reform are key -- if they're enacted over a long period of time.

But the growth rates of Medicare and the economy are still too far apart for Medicare to be sustainable, he says. Medicare is growing by about 8 percent a year. The economy has been sputtering along at less than half that.

Meanwhile, Medicare's largest fund -- the one that pays for hospital insurance -- will run out of money by 2029.

"People don't relate to a crisis that's going to occur 20 or 30 years from now," he says.

One way to increase awareness, Reischauer says, is to reduce the subsidy provided through the tax system for employer-provided health care.

In other words, taxing people for the health care they receive through their employer.

"That helps Medicare simply by making the whole system more cost-conscious," Reischauer says. "Right now we're very ignorant of exactly the full costs of our health care, or what impact it's having on us."

'This Is Not About Today's Seniors'

Both Blahous and Reischauer say one major hurdle to entitlement reform is misinformation about what reform would actually mean, particularly when it comes to seniors and Medicare.

Voters over 65 broke 58 to 39 percent for Republicans in the midterm elections. And many of them saw ads like one from North Carolina congressional candidate Renee Elmers, which accused the president of "cutting Medicare half a trillion dollars to pay for Obamacare."

"The Affordable Care Act did reduce Medicare spending by about half a trillion dollars," Reischauer says. "But beyond that, the ad is a complete mischaracterization."

The new health care law, he says, also closed a hole in the prescription drug plan, so that people who pay a lot for medication aren't denied insurance coverage. It provides for an annual physical, another new benefit.

On Social Security, Blahous says seniors have nothing to worry about until closer to 2030.

"This is not about today's seniors," he says. "We're basically making decisions about the rate of growth of future benefits and the rate of growth of future tax burdens."

He adds, "Unfortunately, a lot of our political discussion often is surrounded by scaring seniors."

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