- What's here to read on the bulletin board:
- HEALTH CARE REFORM LAW—
- Social Security and Medicare Trustees Annual Briefing
Treasury Secretary Timothy Geithner, second from right, speaks about the Social Security and Medicare Trustees Report, Thursday, Aug. 5, 2010, at the Treasury Department in Washington. Joining him, from left are, Social Security Administration Commissioner Michael J. Astrue, Labor Secretary Hilda Solis, and Health and Human Services Secretary Kathleen Sebelius.
Kathleen Sebelius, the Secretary of Health and Human Services, and Timothy F. Geithner, the Treasury secretary, at a briefing Thursday on a report by Social Security and Medicare trustees.
Medicare Stronger, Social Security Worse in Short Run, Report Finds
By Robert Pear and Jackie Calmes
published in New York Times, August 5
WASHINGTON — Medicare will remain financially solvent for 12 additional years, until 2029, because of the cost-cutting measures in President Obama’s recently enacted health care legislation, the program’s trustees projected on Thursday.
The financial outlook for Social Security is "little changed from last year," the report said. In the short run, it added, the financial condition of the retirement program has worsened because of high unemployment, which has reduced payroll tax revenues. For the first time, money flowing out of the program this year exceeds money flowing in.
The trustees predicted that the Social Security trust fund would be exhausted in 2037, the same date as projected last year. The Social Security commissioner, Michael J. Astrue, said this was "not a cause for panic," because continuing tax revenue would still be sufficient to pay more than 75 percent of benefits even after exhaustion of the trust fund.
Both programs continue to face intense financial pressure in coming decades as the population ages and health care costs rise. Medicare, in particular, faces eventual insolvency if more is not done to balance its obligations to provide health care to older Americans with the tax revenues that pay for the program. Because inflation remains low, the report said, Social Security beneficiaries will probably not receive a cost-of-living adjustment in 2011, just as they did not receive one this year.
The report comes at a time of growing political ferment over the future of the programs, which account for about one-third of all federal spending, and they provoked contradictory reactions.
Many advocates on the left seized on the updates to argue that no changes were needed, especially for Social Security, while some on the right said the report showed a need for cutbacks in future benefit promises or even for privatization.
Liberal groups have begun mobilizing this summer to oppose any cut in Social Security benefits or increase in the retirement age that might be recommended by a bipartisan fiscal commission. The panel, appointed by Mr. Obama, is to vote on its final report by Dec. 1.
Dozens of liberal organizations, including the A.F.L.-C.I.O., the N.A.A.C.P. and MoveOn.org, formed the Strengthen Social Security coalition last week. On Tuesday, representatives of those groups and others, including AARP, met with two administration officials and "gave them an earful,"in the words of one participant.
Nancy J. Altman, co-chairwoman of the coalition, said she feared that some people in Washington, including a few members of the president’s fiscal commission, would use the trustees’ report to "advance their agenda of cuts to Social Security benefits."
Many on the left are anxious because they believe that the administration, having won cost-saving changes in Medicare, is turning its sights to Social Security, in an effort to stabilize its long-term finances and reduce the nation’s future debt load.
Bruce N. Reed, a former Clinton White House official who is executive director of the fiscal commission, said, "Some on the left are concerned that Social Security would be used for deficit reduction purposes, and that’s not anybody’s goal." But Mr. Reed added, "The trustees’ report reaffirms the importance of taking action to strengthen Social Security’s solvency over the long haul."
The trustees said the new health care law would contribute to an improvement in the finances of Social Security as well as Medicare. Starting in 2019, the law imposes a new tax on high-cost health insurance plans. The tax is expected to cause a shift in employee compensation from health insurance to wages, which are subject to Social Security payroll taxes.
In the short run, however, the outlook for Social Security continued to deteriorate. "Benefit payments are expected to exceed tax revenue for the first time this year, six years earlier than was projected last year," said Treasury Secretary Timothy F. Geithner.
In their annual report, the trustees predicted that, under existing law, Medicare’s hospital insurance trust fund would be exhausted in 2029, rather than in 2017, as projected in last year’s report. This is "a record increase from one report to the next," Mr. Geithner said.
The trustees, he said, assumed that the new health care law would produce "very substantial improvements in the rate of growth in health care costs"and fundamental changes in the way health care is delivered. The new law squeezes nearly a half-trillion dollars from Medicare spending in the next 10 years. The savings are based on an assumption that hospitals, nursing homes and other health care providers will become more efficient, increasing their productivity to match productivity gains in the overall economy.
If tclass="style2"hat does not happen, the trustees said, Medicare will pay many hospitals and doctors less than the cost of the goods and services they purchase, and providers may "eventually become unwilling or unable to treat Medicare beneficiaries."
The report also assumes that Medicare will cut payment rates for doctors’ services by 23 percent on Dec. 1 and by a further 6.5 percent on Jan. 1, as required under existing law. This assumption is unrealistic, the report said, because "Congress is virtually certain to override" the scheduled cuts, as it has done in recent years.
The report makes clear that Medicare still faces major financial problems. If, as expected, Congress overrides the cuts in doctors’ fees, the cost of Part B of Medicare, which covers physician services, will grow about 8 percent a year in the coming decade, and Part D, which covers prescription drugs, will grow 9.4 percent a year — much faster than the economy, the trustees said.
About one-fourth of the people on Medicare, new beneficiaries and those with relatively high incomes, "will be subject to unusually large premium increases next year," the trustees said. But, they added, the other three-fourths of beneficiaries will not face a premium increase in 2011.
Treasury Secretary
Timothy Geithner on Medicare and Social Security
Law Will Extend Medicare Fund
By Jackie Calmes
Published in New York Times, August 5
Washington - Medicare will remain financially solvent for 12 years longer than projected a year ago — until 2029 — because of the cost-cutting measures in President Obama’s recently enacted health care legislation, the program’s trustees reported on Thursday.
Social Security’s long-term finances also stand to improve slightly, the report said, though in the short run the retirement program’s condition has worsened because of high unemployment, which has reduced payroll tax revenues.
Both programs continue to face intense financial pressure in coming decades as the population ages and health care costs rise.
Medicare, in particular, faces eventual insolvency if more is not done to balance its obligations to provide health care coverage to the elderly with the tax revenues that pay for the program.
Medicare’s hospital insurance trust fund should remain solvent until 2029, or 12 years more than projected in last year’s report, the trustees said. The long-term, 75-year shortfall for the hospital fund also is reduced, as are the projected costs of the separate Medicare Supplementary Insurance program.
But both parts of the Medicare system will require additional reforms to be financially sustainable, the trustees say.
Social Security’s long-range finances stand to improve slightly starting in 2019, they said, from a new tax that takes effect that year on the priciest health insurance plans, which generally go to highly paid managers and executives. The tax is expected to result in a shift of compensation for such individuals from health benefits to income, which is subject to the payroll taxes for Social Security and Medicare.
In the short run, however, Social Security’s picture has continued to deteriorate because of the recession. For the first time, benefit payments this year will exceed the revenues coming into the program — six years earlier than was projected in the 2009 trustees report. The trustees project that Social Security’s benefits and revenues will return to rough balance for the next several years as the economy continues to improve. But, they caution, the swelling of the retiree population by aging baby boomers soon will cause the program’s deficits to grow rapidly.
Current payroll tax and interest income for Social Security will cover benefits through 2024, projections show. After that, the program will have to draw down the Social Security trust fund, which is not an actual reserve of money but an accounting device tracking the accumulated surplus.
The fund is projected to be emptied in 2037 — the same date as projected last year. Thereafter, incoming payroll tax revenues would only cover somewhat more than three-quarters of scheduled benefits — requiring reduced benefits, higher taxes or both. "Despite the projection that Social Security can continue to pay full benefits for nearly 30 years, the sooner action is taken, the more options for reform will be available, and the fairer reforms will be to our children and grandchildren," Treasury Secretary Timothy F. Geithner, a trustee, said in a statement.