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Medicare Gets New Lease On Life; Social Security Remains Healthy

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The new health care law has significantly improved the prognosis for Medicare, extending the life of its trust fund by 12 years until 2029, and thereby delaying any need for dramatic changes in benefits or revenues, according to a new report.

The annual check-up from government actuaries overseeing the nation's two central safety-net programs also found that Social Security continues to be much less of a problem than Medicare, and will remain in strong financial shape at least through 2037.

"The financial outlook for the Medicare program is substantially improved as a result of the far-reaching changes in the Patient Protection and Affordable Care Act," concludes the Medicare report -- although the trustees warned that the improvements depend on the successful implementation of the law.

Social Security, according to its annual report, is expected to pay out slightly more in benefits than it receives in payroll tax this year, for the first time since changes were made in 1983. But payroll taxes are only one source of income for the program, and with the others -- including interest income on its $2.5 trillion trust fund, held in special issue U.S. Treasury securities -- the program is expected to continue to run a surplus until 2024.

The program will need to start spending from its trust fund in 2025, with that fund becoming exhausted in 2037, which is consistent with last year's estimate. But at a press conference Thursday, Social Security Commissioner Michael J. Astrue, one of the government trustees releasing the report, begged reporters not to scare the public by exaggerating the significance of trust fund exhaustion

"That does not mean that there will be no money left," Astrue said. At that point, even if Congress took no action, Social Security could still pay out 78 percent of expected benefits from annual revenues. "That would be a bad result, but it is a far cry from having no benefits at all," he said.

Inaccurate reporting on the topic tends to "make young people despair about Social Security," he said.

The program, signed into law in 1935 by Franklin Delano Roosevelt, has served as an economic lifeline for millions over the past 75 years. "I'm excited about the next 75 years of Social Security, and you should be too," Astrue said.

Astrue said that both reports taken together, along with recent analyses by other groups such as the Congressional Budget Office, show that the new health care law will result in "very, very, very substantial improvements in the rate of growth of health care costs... on a scale that make a very substantial impact on that piece of our long-term fiscal challenges."

Astrue and the three cabinet members -- Timothy Geithner of Treasury, Hilda Solis of Labor, and Kathleen Sebelius -- who serve as trustees of the two program all spoke positively of the fiscal commission that President Obama has commissioned to suggest ways to reduce the long-term federal deficit.

But the new reports seem to cast doubt on the commission's current direction, which is widely interpreted to be an assault on social programs.

Robert Greenstein, a leading liberal budget expert who directs the Center on Budget and Policy Priorities, called attention to what he called the "huge reduction" in Medicare's long-term budget problems. The new report projects an 80 percent reduction in the 75-year shortfall for the Medicare trust fund, from 3.88 percent of taxable payroll to a much more manageable 0.66 percent.

That means Medicare "is in dramatically better financial shape than it was prior to the enactment of the health reform law," even as the law simultaneously improves coverage and reduces premiums, Greenstein told the Huffington Post.

And these are reliable numbers, he said. "These are not political numbers. These numbers are based on the work of the Social Security and Medicare actuaries. Political officials can put whatever spin they want on the numbers, but the numbers themselves are generally not subject to political influence."

Nancy Altman, co-chairman of the Strengthen Social Security Campaign, said in a statement: "Every year, the trustees' reports become an excuse for fear mongering by those who should know better. This year, the news is especially good for Medicare, thanks to the enactment of health care reform. The news for Social Security is even better...

"Unfortunately, we know there are some in Washington, including a few members of the Administration's fiscal commission, who will use this report to try to advance their agenda of cuts to Social Security benefits, including raising the retirement age. Politicians should stop scaring the American people. Social Security is strong and should be strengthened, not cut."

Update at 6 p.m. ET: In his speech at a Thursday afternoon fundraiser for Illinois Democratic Senate candidate Alexi Giannoulias, President Obama used the new data to talk up the health reform law: "We just got a report today from the trust fund that manages Medicare saying we've extended the life of Medicare by 12 years because of the health insurance reform. It is going to be more secure for our seniors and it's going to be there for future generations because of the changes we made," he said.

And New York Times columnist Paul Krugman blogs about Bending the Curve: "Yes, it's just a projection, and debatable like all projections. And it's still not enough. But anyone who both claims to be worried about the long-run deficit and was opposed to health reform has some explaining to do."

But don't expect the deficit hawks to back down. In a statement released Thursday evening, David M. Walker, who heads the Peter G. Peterson Foundation, declared: "The 2010 Annual Trustees Reports on Social Security and Medicare underscore the need for a comprehensive plan to address our nation's longer-term fiscal imbalances that ensures that these critical social programs are secure, solvent, and sustainable for America's future generations."

Walker said the report only "appears" to show that health reform will improve Medicare's outlook. In particular, Walker called attention to a dissent in the Medicare report (p. 289) in which Medicare Chief Actuary Richard Foster wrote that "the financial projections shown in this report for Medicare do not represent a reasonable expectation for actual program operations" because they assume "unsustainable reductions in physician payment rates" in the short term, and understate "the strong likelihood that the statutory reductions in price updates for most categories of Medicare provider services will not be viable" in the long term.

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Dan Froomkin is senior Washington correspondent for the Huffington Post. You can send him an e-mail, bookmark his page; subscribe to his RSS feed, follow him on Twitter, friend him on Facebook, and/or become a fan and get e-mail alerts when he writes.

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