By Ricardo Alsonso-zaldivar
And Martin Crutsinger, Associated Press Writers
August 5, 2010
WASHINGTON – The annual checkup
of the government's big benefit programs for the
elderly show that the Obama administration's
sweeping health care overhaul will extend the life
of the Medicare hospital insurance fund by 12 years.
But officials cautioned Thursday
that the gain will depend on achieving significant
savings in health care in coming years.
The report found that the
Medicare Hospital trust fund will not be exhausted
until 2029, 12 years longer than estimated last
year. That improvement was credited to the cost
savings that will occur with the passage earlier
this year of health care reform.
The annual report of the trustees
for Medicare and Social Security said the recession
had made the outlook for the Social Security trust
fund worse in the near term, however.
They said the Social Security
program is projected to pay out more in benefits
than it collects in taxes for the first time this
year and next year. The Social Security trust fund
is expected to be exhausted in 2037, the same date
as in last year's report.
The report noted that achieving
the health care savings needed to extend the life of
the Medicare trust fund "may prove difficult and
will probably require that payment and health care
delivery systems be made more efficient than they
are currently."
The administration delayed
issuance of the trustees report, which normally
comes out in the spring, in order to recalculate
projected spending estimates based on the changes
the new health care law brought about or will bring
about in the future.
Treasury Secretary Timothy
Geithner, the head of the trustees panel, said that
while the new report showed "very positive
developments" from the new health care law it also
underscored "that we must continue to make progress
addressing the financing challenges" facing both
Medicare and Social Security.
The trustees report said that
Social Security pension and disability payments will
exceed revenues for this year and 2011, reflecting a
deep recession which has knocked millions of people
off payrolls, which means they are not paying Social
Security payroll taxes.
The report said the program would
return to the black in 2012 through 2014 but that
benefit payments will again exceed tax collections
in 2015. For every year after 2015, the report
projects that Social Security will be paying out
more than it receives in tax collections under the
impact of the retirements of 78 million baby
boomers.
The government will then have to
turn permanently to its trust fund to make up the
difference between Social Security taxes and the
benefits being paid out. The trust fund, which
exists in paper form in a filing cabinet in
Parkersburg, W.Va., are bonds backed by the
government's "full faith and credit" but not by any
actual assets. That trust fund, currently at $2.5
trillion, has been spent over the years to fund
other parts of government.
To redeem the trust fund bonds,
the government will have to borrow in public debt
markets or raise taxes. At the point that the trust
fund is exhausted in 2037, the trustees said the
government will still be collecting enough in Social
Security payroll taxes to meet three-fourths of
current benefit levels.
Health and Human Services
Secretary Kathleen Sebelius, another trustee, told
reporters that the trustees assumed current law in
making their projections, including a cut in
doctor's Medicare payments of 23 percent starting in
December. Congress has for years voted to put more
money in the Medicare program to keep such sharp
cuts in doctor's payments from occurring.
The number crunching and analysis
for the trustees report is done by a group of
nonpartisan professionals at the Office of the
Actuary, an obscure economic unit in the Health and
Human Services Department that has a reputation for
independence. To the consternation of White House
officials, recent reports from that office have
raised questions about the heath care law's impact
on Medicare.
An April 22 analysis pointed out
that the projected gain of 12 years of additional
solvency for Medicare, a figure that was also used
in the health care debate, was largely an
"appearance," stemming from how Medicare cuts are
handled under federal accounting rules. Under the
law, savings from those cuts will be used to finance
coverage for the uninsured.
"In practice, the improved
(Medicare) financing cannot be simultaneously used
to finance other federal outlays (such as the
coverage expansions) and to extend the trust fund,
despite the appearance of this result from the
respective accounting conventions," the report said.
A companion report concluded that
some of the $575 billion in Medicare savings over 10
years "may be unrealistic" because future Congresses
could be pressured to roll back cuts to providers in
the health care law.
The actuary's office also
projected that enrollment will plummet in popular
private insurance plans offered through Medicare, as
a result of cuts in the health care law.
More than 53 million people
receive Social Security. Retirement benefits average
$1,100 a month, and disabled workers get an average
of $1,065. Medicare covers more than 46 million
retirees and disabled people.
Social Security is financed by a
6.2 percent payroll tax on wages below $106,800. The
tax is paid by workers and matched by employers.
Medicare is financed by a mix of general revenues,
payroll taxes and premiums paid by beneficiaries.
President Barack Obama has formed
a bipartisan fiscal commission that is working on
recommendations to improve government finances,
including those for Social Security and Medicare.
Seniors' groups are lobbying against benefit cuts,
while conservatives say they will oppose tax
increases, creating a difficult political
environment for compromise.
___
Associated Press writer Stephen
Ohlemacher contributed to this report.
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