Medicare Projected to be Insolvent by 2018

The Medicare Hospital Insurance Trust Fund will become insolvent in 2018, based on current cost and population trends, two years earlier than predicted last year, according to the Social Security and Medicare trustees annual report. Meanwhile, spending under the Supplementary Medical Insurance Trust Fund, which includes the new Medicare drug benefit, is projected to increase rapidly, resulting in growing pressure on future federal budgets and the U.S. economy as a whole, officials said. Medicare represented 2.7% of the nation's gross domestic product in 2005. The trustees predicted that the Social Security program will run out of money in 2040 -- one year sooner than last year's projection -- and its expenditures will begin exceeding tax revenue in 2017. "If we do not take action soon to reform both Social Security and Medicare, the coming demographic bulge will drive federal spending to unprecedented levels, consume nearly all projected federal revenue and threaten the nation's future prosperity," Treasury Secretary John Snow said.