May 13 (Bloomberg) -- Medicare and Social Security, the two main safety nets for American retirees, will account for more than 17 percent of the nation’s output by 2083 if left unchecked, the programs’ trustees said yesterday.

The declining financial health of the two entitlement programs puts pressure on Congress and President Barack Obama to come up with ways to cut costs and boost revenue for both. Obama said this week that fixing the nation’s health-care system is an “imperative for America’s economic future.”

The Social Security trust fund will run out of assets in 2037, four years sooner than previously forecast, the trustees said yesterday. Medicare’s hospital fund will be exhausted by 2017, two years earlier than predicted a year ago.

“There is no more important long-term fiscal measure than gaining control of the growth of Medicare costs,” Treasury Secretary Timothy Geithner said yesterday.

“After we have passed health-care reform that puts our nation on a path to lower growth in health-care costs and expanded affordable coverage, this president will work to build a bipartisan consensus to ensure the long-term solvency of Social Security,” Geithner said in a statement.

Obama is “committed to a serious effort to confront that issue,” David Axelrod, a senior White House adviser, said after yesterday’s report. “I expect that as the year goes on, that will become a prominent discussion” with leaders and members of Congress.

Nothing Ruled Out

“We’re going to work through what the best vehicle is to get to a conclusion,” Axelrod said in an interview. “I’m not going to rule anything in or out.”

Spending on Medicare, the health insurance plan for the elderly, will reach a legal limit by 2014, the same year predicted in 2008, the trustees’ report said. It’s the third year in a row that Medicare’s trustees have pulled the so-called trigger, a law mandating that the president introduce legislation the following year to protect the program’s financing.

The trustees’ annual report also estimated that Medicare’s hospital fund will be exhausted by 2017, two years earlier than predicted a year ago. The trust fund will need an additional $13.4 trillion to meet all its obligations over the next 75 years.

Health-Care Costs

Geithner and Health and Human Services Secretary Kathleen Sebelius said yesterday that overhauling the broader U.S. health-care system is a key to reining in Medicare’s costs.

“The only way to truly slow Medicare spending is to slow overall health-care spending,” Sebelius said.

Obama this week received pledges from drugmakers, hospitals, insurers and other related groups to slow health-care spending by 1.5 percent a year over the next decade, a goal that would save the U.S. about $2 trillion. Obama said he wants to see health-care overhaul that will cut costs, give Americans a choice of doctors and medical coverage and provide affordable coverage for everyone.

Spending on Social Security is expected to exceed revenues in 2016, one year earlier than last year’s forecast, the report said. The trust fund will need an additional $5.3 trillion over the next 75 years to meet all scheduled benefits, the trustees said. The retirement-assistance program can continue to pay full benefits for about 30 years, the report said.

Cash Shortfall

The government retirement system faces a cash shortfall because the number of retirees eligible for benefits will almost double to 79.5 million in 2045 from 40.5 million this year. By 2045, there will be 2.1 workers paying into the system for every retiree, compared with 3.2 workers this year.

Bush and then-Treasury Secretary John Snow campaigned across the nation for partial privatization of Social Security in 2005, shelving the idea after encountering widespread opposition from Congress and the public.

Obama “explicitly rejects the notion that Social Security is untouchable politically and instead believes there is opportunity for a new consensus on Social Security reform,” Geithner said in his statement.

The administration yesterday raised its estimate of the budget deficit this year to a record $1.84 trillion, up 5 percent from the February estimate, and to $1.26 trillion next year, up 7.4 percent compared with the earlier estimate. Next year’s budget will end up at $3.59 trillion, the White House said, compared with the $3.55 trillion it estimated previously.

‘Reckless Borrowing’

“The Social Security and Medicare trustees’ report confirms what we already knew: Our nation cannot afford to continue this reckless borrowing and spending spree,” House Republican Leader John Boehner said in a statement. Obama’s policies “are putting our kids and grandkids deeper in that hole, and deeper in debt to China and the Middle East.”

The two funds’ financial condition has been hurt by declining payroll-tax revenue as the worst recession in at least half a century drove the jobless rate to 8.9 percent in April, the highest since September 1983. Since the recession started in December 2007, the world’s largest economy has lost 5.7 million jobs, the most of any economic downturn since the Great Depression.

To contact the reporter on this story: Alison Fitzgerald in Washington at afitzgerald@bloomberg.net

Last Updated: May 13, 2009 00:01 EDT