ONLY A WEEK after the Senate thought it had salved Social Security's wounds well enough for the system to limp through to the next decade, the Social Security actuaries created more trouble.
New projections for Medicare, the health insurance part of Social Security, show yearly outlays running a billion or two higher than did the estimates used by the Senate in marking up its bill. Higher Medicare costs mean that the expected shortfalls in the retirement fund cannot be covered by reallocating money from the health trust fund-- as the Senate had planned. Even with a reasonably healthy economy, the projections now show that, by 1985, the combined fund reserves will fall below the level needed to cover payments.
While the new estimates are unwelcome, they are not surprising. Hospital costs--the main factor in Medicare's startling growth--have been rising sharply since the demise of the Carter administration's cost containment program. The new projections are based, in large part, on actual Medicare experience over the past year. Even with the projected outlay increases, Medicare could meet its obligations until 1990, but its present surpluses could not be used to cover deficits in the retirement fund. And even if measures are taken to curb hospital costs--and there are no quick fixes short of direct controls--the combined funds would still be inadequately protected if, as now seems increasingly likely, the economy remains sluggish for some time.
All this is bad news for the House Ways and Means Committee, which had hoped to mark up a bill similar to the Senate's and get the politically explosive issue off the agenda for a few years. Postponing further action until the deficit is a reality is a bad idea. A modest correction now can build up reserves over the next three years and avoid the need for a more abrupt and harmful adjustment later.
For the short run, only three choices are available. One is to raise the Social Security tax. That would discourage employment and add to the tax burden of the middle-income families who gained least from the income tax cuts. Another is to add general revenues to the trust fund. That would increase the deficit and likely lead to further cuts in other social programs. The last and, to our mind, best of a set of poor choices is to postpone cost-of-living increases for a few months starting next year.