WASHINGTON -- Trustees for Social Security and Medicare said in an annual report released yesterday that Medicare's long-term difficulties were far more severe than those of Social Security.

		On the Internet Read a summary of the report prepared by the Social Security Administration Board of Trustees

"Medicare's financial outlook has deteriorated dramatically over the past five years and is now much worse than Social Security's," the programs' two public trustees, Texas A&M University economics professor Thomas R. Saving and Syracuse University professor John L. Palmer said in a summary report.

In 75 years, Medicare's unfunded liabilities will be more than twice those of Social Security, they said.

The trustees now estimate that by 2017 the cost of paying Social Security benefits to retirees will exceed the amount of money flowing into the Social Security program from payroll taxes. That is one year earlier than trustees had projected last year. The trustees also said that Social Security's main trust fund will be exhausted in 2041 instead of 2042.

The trustees did not address the fact that Congress will have to start replenishing the trust funds with annual appropriations long before 2041 because the funds' $1.5 trillion in assets is currently being used to pay for general government expenses.

While Social Security's main trust fund is expected to run dry in 2041, Medicare's primary asset -- the Hospital Insurance Trust Fund -- will be exhausted two decades earlier in 2020. At that point, taxes being paid to support Medicare will be enough to cover only about 79 percent of benefits.

Medicare already has more money going out than coming in, and the 2003 Medicare prescription drug benefit has added significantly to Medicare's financial obligations. The Congressional Budget Office recently predicted that the prescription drug benefit alone has added a $593 billion to the program's costs between 2004 and 2013.

Bush administration officials acknowledged yesterday that Medicare costs eventually will have to be reined in, but they tried to shift attention to the one bright spot in Medicare report: the date Medicare's trust fund is projected to run out was moved back one year from 2019 to 2020. Administration officials said the change resulted from slightly lower expenditures last year and slightly more money flowing into the program than expected.

The Bush administration is pushing for an overhaul of the Social Security system arguing that the current system is not sustainable and requires urgent repair. Democrats say the system is not in such bad shape that they need to rush in.

Vice President Dick Cheney will make the administration case this afternoon in a town hall meeting in the Kerr Fitness and Sports Center at La Roche College in McCandless. He will appear with U.S. Rep. Melissa Hart, R-Bradford Woods.

Treasury Secretary John W. Snow said the administration was dealing with Social Security instead of Medicare because "it cries out for answers," and because steps were taken in 2003 to address Medicare's rising costs.

Health and Human Services Secretary Michael O. Leavitt argued that the 2003 Medicare Modernization Act, which included the prescription drug benefit, placed a new emphasis on preventive care and other cost-saving measures, such as giving beneficiaries more access to physical exams, encouraging electronic prescriptions to cut down on costly medical errors and publicizing the advantages of generic drugs -- all of which officials said will reduce Medicare costs.

But critics of the 2003 legislation, including some conservative Republicans who objected to the prescription drug benefit's price tag, have scoffed at the claim that providing more access to physicals or using more electronic prescriptions will somehow balance out the program's hundreds of billions of dollars in new costs.

"While acknowledging that there is still work to be done, steps have been taken," Leavitt said. "... Medicare modernization [in 2003] was not just about adding prescription drugs, thought that was an important step, it was also about changing the culture to one of prevention.

"We are going to have to deal with the realities of Medicare in the same way we are now dealing with the realities of Social Security," Leavitt said. "We'll continue to work on it, but right now we need to focus on Social Security."

Pressed about what the appropriate time was to revisit Medicare's mounting costs, Leavitt said only that it was an "ongoing process."

One other key adjustment to Social Security's outlook in yesterday's report was that over the next 75 years the projected shortfall in revenues was raised to $4 trillion from $3.7 trillion. By looking one year further into the future, to 2079, this year's report added $300 billion in interest payments on Social Security's debt which would have to be paid by that point if no changes are made to the program.

Trustees also increased projections for Social Security's debt over an "infinite horizon" some hundreds or thousand of years down the road. Last year, trustees reported that number as $10.4 trillion. This year they put it at $11.1 trillion -- again because additional interest would have to be paid on money borrowed to keep the program afloat indefinitely.

Bush and Cheney have both used the infinite horizon projections -- which Democrats and actuaries describe as misleading because they are so far in the future -- to argue that every year Congress does not act, more than $600 billion is added to the program's debt.

But that potential interest payment on the program's debt -- which added $600 billion last year and $700 billion this year -- assumes that Congress will do nothing to address Social Security's long-term solvency issues. And it does not address the fact that going forward with the Bush administration's proposal for personal investment accounts carved out of Social Security could add as much as $1 trillion to the program's long term debt in the first 10 years (some estimates of their cost are much higher).

The administration began gathering infinite horizon projections in 2003, and they have been disputed by Democrats and some actuaries as misleading because they reach so far into the future.

Congressional Democrats emphasized yesterday that the adjustments in Social Security's outlook were slight.

"Today's report confirms that the so-called Social Security crisis exists in only one place: the minds of Republicans," said Senate Democratic Leader Harry Reid in a statement. "In reality, the program is on solid ground for decades to come."

Trustees have pointed out that Social Security's $4 trillion shortfall over 75 years could be eliminated with an immediate increase of 15 percent in payroll taxes or a 13 percent reduction in benefits -- but lawmakers are trying to draw up a less painful solution.

Most of the plans put forward by Republicans to address the program's long-term solvency have included a blend of options -- such as raising the retirement age, raising the cap on the amount of wages that can be taxed for Social Security or changing the way benefits are calculated.

But no plan has emerged yet as a favored solution, and Democrats remain firmly opposed to the President Bush's proposal to give younger workers the option of diverting a portion of their payroll taxes into personal accounts invested in stocks and bonds. Senate Democrats have said they will not negotiate on a long term plan until Bush takes personal accounts off the table.