Reduced health care costs are breathing a little life into the trust fund that supports the Medicare program, adding two years to its lifespan since last year’s report. The prospects for Social Security, another important lifeline for retirees, remain unchanged, according to the Social Security and Medicare Board of Trustees.
The long term health of both programs is in danger unless changes are made to eligibility requirements, benefits are cut or taxes increase.
“Protecting Social Security and Medicare is one of the most significant challenges we face today as a nation,” Treasury Secretary Jack Lew said at a briefing Friday.
Social Security’s combined retirement and disability programs have sufficient resources until 2033. But the portion that serves the disabled becomes insolvent in three years if lawmakers do not act. Its administrators cannot legally transfer funds from one account to another without an act of Congress.
Even with Congressional approval, the move to prop up one program by transferring money from the other would only hurt its viability as a wave of Americans reach retirement age, said Charles P. Blahous, a public trustee.
Roughly 10,000 baby boomers turn 65 every day.
The Medicare Hospital Insurance Trust Fund will have enough money to meet obligations until 2026. Since the Affordable Care Act was passed, trustees have added nine years to the projected solvency of the program.
“The Affordable Care has helped put Medicare on a more stable ground without eliminating a single guaranteed benefit,” said Health and Human Services Secretary Kathleen Sebelius.
The more widely known Medicare programs that supports doctors’ visit and other outpatient expenses and prescription drugs are not funded by the trust fund and receive automatic funding each year.
The report also estimates that premiums will not increase in 2014 for the Medicare program that covers doctors’ visits.
One of the most significant forces in the trustees’ decision to add two years to the Medicare hospital fund’s viability was lower than expected costs in 2012. The program spent $3.6 billion less than projected. Most of the savings came from skilled nursing savings.
There has been a significant slowdown in the rise in medical costs for the last few years, not only in government programs but in the private sector. When administration officials credit the Affordable Care Act, Robert Reischauer, one of two public trustees, estimated that about a third to half of the slowdown could be attributed to the recession.
But he noted the law will build in cost restraints over time, and he said it was responsible for significant savings in 2012 and 2011.
Any expectations about the law’s future effects were kept out of the numbers, he said.
“It would be inappropriate for us to build our projections on hope and expectations in a very uncertain world,” he said.
To get Social Security on a sustainable path, payroll taxes would have to be increased today from 12.4 percent to 15 percent, officials said. Or Congress could cut benefits by 16 percent.
If lawmakers do nothing until 2033, benefits would have to be cut by 23 percent.
“The challenge is going to be to find a path to have this conversation in a bipartisan way,” Lew said.
“We have the maximum range of options the sooner we address (it.) We have the time, but it’s not free to wait.”