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| Health and Human Services Secretary Kathleen Sebelius, center, accompanied by Treasury Secretary Jacob Lew, right, and Acting Labor Secretary Seth D. Harris, speaks about Social Security and Medicare , Friday, May 31, 213, at the Treasury Department in Washington. The government says Medicare's giant hospital trust will not be exhausted until 2026, while the date that Social Security will exhaust its trust fund is unchanged at 2033. The date for Medicare is two years later than was projected last year. |
WASHINGTON
(AP) -- Medicare's long-term health is starting to look a little better,
the government said Friday, but both Social Security and Medicare are
still wobbling toward insolvency within two decades if Congress and the
president don't find a way to shore up the trust funds established to
take care of older Americans.
Medicare's giant
fund for inpatient care will be exhausted in 2026, two years later than
estimated last year, while Social Security's projected insolvency in
2033 remains unchanged, the government reported.
An
overall slowdown in health care spending is helping Medicare. Spending
cuts in President Barack Obama's health care law are also having a
positive impact on the balance sheet, but they may prove politically
unsustainable over the long run.
The
relatively good news about two programs that provide a foundation of
economic security for nearly every American family is a respite, not a
free pass. Program trustees urged lawmakers anew to seize a current
opportunity and make long-term changes to improve finances. Action now
would be far less jarring than having to hit the brakes at the edge of a
fiscal cliff.
Politically, however, Friday's
positive report and the absence of a crisis could make legislative
action less likely, especially in light of the lack of trust between
President Barack Obama and Republicans in Congress. No end is in sight
for the partisan standoff over what to do about Social Security and
Medicare, two of the government's costliest programs, and the mammoth
budget deficits they help fuel.
Still, fresh warnings were sounded.
"Under
current law, both of these vitally important programs are on
unsustainable paths," said economist Robert D. Reischauer, one of two
independent public trustees overseeing the annual reports.
The
window for action "is in the process of closing even as we speak," said
his counterpart, Charles Blahous III, also a prominent economist.
Social
Security provides monthly benefit checks to about 57 million people,
including 40 million retirees and their dependents, 11 million disabled
workers and dependents and 6 million survivors of deceased workers.
Medicare covers nearly 51 million people, mainly retirees but also
disabled workers.
If the funds ever become
exhausted, the nation's two biggest benefit programs would collect only
enough money to pay partial benefits.
Social
Security could cover only about 75 percent of benefits, while Medicare's
fund for hospital and nursing rehabilitation care could pay 87 percent
of costs.
With 10,000 baby boomers turning 65 every day, America's aging population is straining both programs.
While
the combined Social Security fund was projected to be depleted in 2033,
the trustees warned that the threat to one of its component trust funds
that makes payments to workers on disability is much more urgent.
They
projected that the disability trust fund would deplete its reserves in
just three years, in 2016. That date is unchanged from last year's
report.
Blahous said he hoped that would prod lawmakers to act on the broad challenges facing Social Security.
The
remaining trustees are senior administration officials, including
Treasury Secretary Jacob Lew and Health and Human Services Secretary
Kathleen Sebelius. While acknowledging the need for long-term changes to
improve program finances, they used the occasion of the annual report
to assert that Obama's policies are working, particularly his health
care overhaul.
White House spokesman Josh
Earnest saw validation in the reports, too. The Medicare numbers showed
Obama's health overhaul "is having a positive effect on the deficit," he
said, while the Social Security report supports the president's
contention that the retirement program is "not driving our short-term
deficit."
Motivation for both sides to tackle
federal spending deficits -always risky because of the pain that could
cause voters - has already declined because the improving economy has
also pushed projected federal deficits downward. This year's shortfall
is now expected to be $642 billion, down from $1.1 trillion last year.
Obama
has proposed significant changes to both benefit programs, in the
context of budget talks. Those include a formula change that would pare
cost-of-living increases for retirees, and nearly $400 billion in
Medicare savings, mainly from cuts to service providers. Congressional
Republicans want to do more, particularly on Medicare, by converting the
program into a private insurance system.
Social
Security is financed by a 6.2 percent tax on the first $113,700 of
workers' wages, paid by both employers and workers. Congress temporarily
reduced the tax on workers to 4.2 percent for 2011 and 2012, though the
program's finances were being made whole through increased government
borrowing.
The Medicare tax rate is 1.45 percent on all wages, paid by both employees and workers.
Blahous
said if Social Security's shortfall were to be fixed immediately by
boosting the payroll tax alone, that rate for workers and employers
together would have to be increased from its current 12.4 percent to
nearly 15.1 percent. If action were delayed until 2033 - the year of
insolvency - the tax would have to rise to 16.5 percent.
If
the savings were to come only from reducing benefits and were made
immediately, the benefits would have to be cut 16.5 percent for both
current and future recipients.
Targeting future beneficiaries alone would mean benefit cuts of nearly 20 percent.
Waiting
until 2033 to impose the changes would mean benefit cuts of 23 percent
for current and future recipients. If policymakers wanted to limit the
cuts to future beneficiaries, even wiping out all of their benefits
would not close the shortfall, said Blahous.
"The window of opportunity to deal with Social Security closes well before the early 2030s," he said.
Not all the news was bleak.
The
trustees projected a 2 percent Social Security cost-of-living increase
for 2014. And the monthly Medicare Part B premium for outpatient care
was projected to remain the same as this year. That's generally $104.90,
although upper-income retirees pay more.
The
good news for Medicare may not last. The program's future costs are
difficult to estimate, subject not only to economic fluctuations and the
aging society but also to the impact of the latest blockbuster drug or
technological breakthrough.
Nonetheless, the
trustees said the overall slowdown in health care spending is providing
relief for Medicare. It was the main reason for extending the life of
the trust fund by two years. The report said there was a particularly
sharp drop in spending on nursing home care. Medicare pays for limited
nursing home stays while patients recuperate from hospitalization.
Also
cited were reductions in payments to popular Medicare Advantage plans,
the private insurance alternative within the program. About 1 in 4
Medicare beneficiaries are in such plans, which offer lower
out-of-pocket costs usually in exchange for limitations on the choice of
hospitals and doctors. The plans had once been overpaid when compared
to the cost of care in traditional Medicare, but Obama's health care law
cut back those payments.
Public trustee
Reischauer, who specializes in health care economics, said he's hopeful
and cautiously optimistic that the slowdown in health care costs will
continue.
HHS Secretary Sebelius said the
health care overhaul "has helped put Medicare on a more stable ground
without eliminating a single guaranteed benefit."
But
the top Republican on the Senate Finance Committee, Utah Sen. Orrin
Hatch, said the report "shouldn't give anyone comfort" because
Medicare's slower spending reflected the country's weak economy, even as
the program faces rapidly growing numbers of recipients.
"Reforming
Medicare and Social Security is a national imperative that policymakers
on both sides of the aisle and at the White House must embrace if we
are going to protect those programs for our seniors and for future
generations, while simultaneously bringing down our sky-high debt,"
Hatch said
AARP, the seniors lobby, said it will continue to fight cuts in either program.
