Medicare fund will last extra 12 years — maybe
           
Associated Press Writers Stephen Ohlemacher And Ricardo Alonso-zaldivar

WASHINGTON – Medicare is in better shape because of President Barack Obama's sweeping health care overhaul and will stay afloat a dozen years longer than earlier projected, trustees forecast Thursday. But that depends on cuts in care that the system's top analyst says are highly doubtful.

The annual report by the trustees who oversee Medicare and Social Security, led by Treasury Secretary Timothy Geithner, gives backers of the new health care law evidence of a positive impact on government entitlement programs, but it also undercuts the findings with a host of caveats.

In what amounted to a dissenting opinion, top Medicare actuary Richard Foster warned that the report's financial projections "do not represent a reasonable expectation" for the hospital fund for America's elderly.

Kathleen Sebelius, secretary of health and human services and one of the trustees, said they were required to assume current law in making their projections, including a cut in Medicare payments to doctors. She, too, doubted the cuts would ever happen, "which is why we continue to provide cautionary notes" in the report.

The trustees projected the Medicare Hospital trust fund would be exhausted in 2029, or 12 years later than estimated last year.

The news wasn't as rosy for Social Security, which will pay out more in benefits than it collects in taxes for the first time in decades this year and next year. The Social Security trust funds are expected to be exhausted in 2037, the same date as in last year's report.

More bad news for Social Security recipients: The trustees project no cost-of-living increase for Social Security recipients next year, the second year in a row with no increase. The adjustments are based on inflation.
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Foster, the Medicare official, said in a statement included in the report that the program's projected savings might not be realistic.
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The nonpartisan experts said there are two big reasons for their estimate of higher costs:

• The trustees' report assumes that doctors will absorb a 30 percent cut in Medicare payments over the next three years. The cuts are called for under current law but are routinely waived by Congress because too many doctors would stop seeing Medicare patients.

• Projected savings in the new health care law from cuts to hospitals, nursing home and other institutional providers will prove to be politically unsustainable in the long run.

"For these reasons, the financial projections shown in this report for Medicare do not represent a reasonable expectation for actual program operations in either the short range ... or the long range," Foster said.

Some supporters of the health care overhaul said Foster had embraced a glass-half-empty approach.

"I think that he raises an important point, but he's too pessimistic," said Robert Greenstein, head of the Center on Budget and Policy Priorities, which advocates for the poor.
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For the first time since the 1980s, Social Security will pay out more money in benefits this year and next year than it collects in payroll taxes. The program will post surpluses for a few years after that before returning to permanent deficits in 2015. Unless Congress acts, the Social Security trust funds are expected to be exhausted in 2037. At that point, Social Security will collect enough in payroll taxes money to cover about three-fourths of the benefits owed.

"The fact that the costs for the program will likely exceed tax revenue this year is not a cause for panic, but it does send a strong message that it's time for us to make the tough choices that we know we need to make," Social Security Commissioner Michael J. Astrue said.

Obama has formed a bipartisan fiscal commission that is working on recommendations to improve government finances, including those for Social Security. Its recommendations are due in December.

More than 53 million people receive Social Security. Retirement benefits average $1,100 a month while disabled workers get an average of $1,065. Social Security is financed by a 6.2 percent payroll tax on wages below $106,800. The tax is paid by workers and matched by employers.

The Social Security trust funds have built up a $2.5 trillion surplus over the past 25 years. But the federal government has borrowed that money over the years to spend on other programs. The government must now start borrowing money from public debt markets — adding to annual budget deficits — to repay Social Security.

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Associated Press writer Martin Crutsinger contributed to this report.