2 Years Added To Expected Life Of Medicare Trust Fund

May 31, 2013
Originally published on May 31, 2013 6:23 pm

"The trust fund that finances Medicare's hospital insurance coverage will remain solvent until 2026, two years beyond what was projected in last year's report," the program's trustees reported Friday.

In a statement, the administrator of the Centers for Medicare & Medicaid Services gives some of the credit to the Affordable Care Act, also known as Obamacare.

"Thanks to the Affordable Care Act, we are taking important steps to improve the delivery of care for seniors with Medicare," said Marilyn Tavenner. "These reforms aim to reduce spending while improving the quality of care, and are an important down payment on solving Medicare's long term financial issues."

The Washington Post notes that the trustees "also credit lower costs and use rates in 'most ... service categories — especially skilled nursing facilities' — a development that most economists believe is in part due to the recent recession but also to more fundamental efforts to reduce costs throughout the health care industry."

Also Friday, Social Security trustees reported the trust fund for that program is still expected to be exhausted in 2033 — a forecast that's unchanged from a year ago. Once the fund is depleted, the program would have enough cash coming in only to pay about two-thirds of projected benefits.

More immediately, the trust fund that's specifically dedicated to Social Security's disability insurance program is still expected to be depleted in 2016.

As The Associated Press notes, both Medicare and Social Security "face significant funding challenges as the giant baby boom generation continues to retire."

Treasury Secretary Jacob Lew said in a statement that:

"Today's reports make clear that while both Social Security and Medicare have sufficient resources to meet their obligations for at least the next decade, it is important that we put in place reforms to strengthen these programs. Fundamentally, Social Security and Medicare benefits are secure today, but reform will be needed so that they will continue to be there for current and future retirees."

In 2009, when Medicare trustees were predicting their trust fund would be exhausted in 2017 and Social Security trustees were saying their fund would be used up by 2037, NPR's John Ydstie and April Fulton explained how those programs are financed.

Copyright 2013 NPR. To see more, visit http://www.npr.org/.

Transcript

ROBERT SIEGEL, HOST:

From NPR News, this is ALL THINGS CONSIDERED. I'm Robert Siegel.

MELISSA BLOCK, HOST:

And I'm Melissa Block. The outlook has brightened a bit for Medicare's finances. That's according to the annual Social Security and Medicare trustee's report released today. It predicts the trust fund will remain solvent two years longer than previously expected. The trustees say among the reasons for that are savings produced by the Affordable Care Act.

More now from NPR's John Ydstie.

JOHN YDSTIE, BYLINE: The trustees now project that the Medicare hospital insurance trust fund will remain solvent until 2026. That's two years longer than last year's projection. After that, the program would only be able to pay 87 percent of promised benefits. The modest improvement in the outlook is partly due to lower projected costs for skilled nursing and the Medicare Advantage program.

The report credited the Affordable Care Act, widely known as Obamacare, for creating a framework for cost reduction. Many Republicans dispute that view, but at a news conference unveiling the report, one of Medicare's public trustees, Robert Reischauer, a former director of the Congressional Budget Office, said the ACA could continue to have a positive effect.

ROBERT REISCHAUER: Because of the restraints included in the Affordable Care Act, which will build over time, and the structural reforms that that act is encouraging, there's reasons, I think, to be quite optimistic.

YDSTIE: The rate of health care cost increases has slowed substantially over the past three years. Kathleen Sebelius, Secretary of Health and Human Services and also a trustee, said continuing that trend is important because health care already represents 17 percent of the economy.

KATHLEEN SEBELIUS: Lowering overall health costs and improving health outcomes is important for the economy, but it's also important for the prosperity of the Americans.

YDSTIE: As for Social Security, its situation remained largely unchanged. Its trust fund is still expected to become insolvent in 2033. After that, incoming payroll taxes will only be able to fund 77 percent of promised benefits, unless Congress acts. Public trustee Charles Blahous said waiting too long to implement changes could lead to sharp tax increases or benefit cuts.

CHARLES BLAHOUS: So by any objective measure, it's getting very late in the game to deal with Social Security finances in a realistic way.

YDSTIE: But there's little indication Washington will take action anytime soon. John Ydstie, NPR News, Washington. Transcript provided by NPR, Copyright NPR.