Outlook for Medicare Has Improved a Bit, U.S. Estimates

Outlook for Medicare Has Improved a Bit, U.S. Estimates

By ROBERT PEAR 5

A stronger economy and slower growth in health spending has helped strengthen the financial outlook for the federal insurance program, the Obama administration said

By ROBERT PEAR

Published: May 31, 2013 

WASHINGTON — The financial outlook for Medicare has improved because of a stronger economy and slower growth in health spending, and the financial condition of Social Security has not worsened, but is still unsustainable, the Obama administration said Friday.

“The projections in this year’s report for Social Security are essentially unchanged from last year, and those for Medicare have improved modestly,” said Treasury Secretary Jacob J. Lew.

The Medicare trustees — four federal officials and two public representatives — said “the modest improvement in the outlook” for Medicare’s long-term finances reflected lower projected spending for skilled nursing homes and private Medicare Advantage plans.

Medicare’s hospital insurance trust fund will be exhausted in 2026, the administration said, and the Social Security trust fund will be depleted in 2033.

In the 2012 reports, the administration said that the Medicare trust fund would run out of money in 2024, while the Social Security fund would be exhausted in 2033.

The programs provide benefits to more than 57 million people, and an average of about 10,000 baby boomers become eligible for Social Security each day.

Payroll taxes and other revenues dedicated to Social Security would be sufficient to pay about three-fourths of promised benefits when its trust fund runs out, administration officials said.

The condition of the economy has improved in the last year, the government is collecting more revenue, and the growth of health spending has slowed.

“Medicare spending per beneficiary increased by just 0.4 percent last year, far below historical averages,” said Kathleen Sebelius, the secretary of health and human services.

In January, Ms. Sebelius said she expected Medicare spending per beneficiary to grow at about the same rate as the economy in the coming decade.

But the number of Medicare beneficiaries will grow rapidly, to 73 million in 2025 from 52 million today, so paying for the program remains a huge challenge, administration officials said.

Members of both parties say that Medicare and Social Security are financially unsustainable in their current forms. But they are nowhere near agreement on changes needed to shore up the programs.

The administration says the outlook for the Medicare trust fund is brighter because of the 2010 health care law, which squeezed nearly $500 billion out of Medicare over 10 years. The law trimmed Medicare payments to many health care providers on the assumption that they would become more productive.

Another factor, officials said, is the Budget Control Act of 2011, which calls for reductions of roughly 2 percent in projected Medicare spending from 2013 to 2021.

Social Security and Medicare accounted for 37 percent of all federal spending last year, and the Congressional Budget Office estimates that — under current law — the figure will grow to 42 percent by 2023.

In an appendix to the annual report, Paul Spitalnic, the acting chief actuary of Medicare, said future costs could well be higher than indicated in the report. Current law would require a reduction of nearly 25 percent in Medicare payments to doctors on Jan. 1, 2014, “an implausible expectation,” Mr. Spitalnic said, and he noted that Congress had usually stepped in to prevent such cuts.

President Obama’s budget would slow the growth of Social Security spending by using a different measure of inflation to calculate cost-of-living adjustments. Republicans like that idea. But the White House has proposed it as part of a comprehensive budget deal that also includes tax increases, which are unacceptable to most Republicans in Congress.

The slowdown in Medicare spending has broad implications for the federal budget and the economy.

“In recent years,” said Douglas W. Elmendorf, the director of the Congressional Budget Office, “health care spending has grown much more slowly both nationally and for federal programs than historical rates would have indicated.” 

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