Medicare’s finances are looking brighter, the government said Monday. The program’s giant hospital trust fund won’t be exhausted until 2030 — four years later than last year’s estimate.
Meanwhile, Social Security‘s massive retirement program will remain solvent until 2034, officials say, although disability benefits are in more immediate danger.
The disability trust fund now is projected to run dry in 2016, unless Congress acts. At that point, the program will collect enough payroll taxes to pay only 81 percent of benefits.
The trustees who oversee Social Security and Medicare issued their annual report Monday on the financial health of the government’s two largest benefit programs.
The trustees project a 1.5 percent increase in monthly Social Security payments to beneficiaries for next year. That would be among the lowest since automatic adjustments were adopted in the 1970s. The increase is based on a government measure of inflation.
Medicare’s Part B monthly premium for outpatient care is expected to remain unchanged for next year, at $104.90. Average premiums for prescription coverage are expected to increase by less than $2 a month.
Social Security’s finances are relatively unchanged from a year ago. Medicare’s improved finances are largely due to a continuing slowdown in health care spending, the report said.
Experts debate whether the health-spending slowdown is the result of a sluggish economy or represents a dividend from President Barack Obama’s health care law, and more recent Medicare cuts by Congress.
Medicare is adding 10,000 new beneficiaries a day as baby boomers reach age 65. But the report said that costs per beneficiary were essentially unchanged in 2013, for the second year in a row. That particular statistic is critical because per-person costs had surged for many years.
In the long run, both Social Security and Medicare are still in financial danger, the trustees said. Benefit cuts, tax increases or a combination of both will be needed to keep paying benefits at current levels.
In 2030, when the hospital trust fund is expected to be depleted, Medicare will collect enough payroll taxes to pay 85 percent of benefits.
“Notwithstanding recent favorable developments, (Medicare) still faces a substantial financial shortfall that will need to be addressed with further legislation,” the report said. “Such legislation should be enacted sooner rather than later to minimize the impact on beneficiaries, providers and taxpayers.”
Social Security’s disability program could be shored up in the short run by shifting tax revenue from the much larger retirement program, as Congress has done in the past. However, that would slightly worsen the retirement program’s long-term finances.
Reposted with permission of the Associated Press.