06 August 2010

Medicare Savings Projections in Dispute

USA Today

WASHINGTON — Savings projected under the landmark health care law signed by President Obama this year have improved Medicare's financial projections, but Republican critics and even the program's chief actuary say the new prognosis is too rosy.

More than $500 billion in Medicare savings projected under the law — the result of cuts to some providers and the popular, all-inclusive Medicare Advantage program — should help extend the program's solvency by 12 years, to 2029, its trustees said Thursday.

Not so fast, Republicans responded, noting that the same savings are being used to help extend health insurance to 32 million more Americans. "If you steal over a half-trillion dollars from Medicare to fund another unsustainable entitlement, Medicare won't be better off," said Sen. Orrin Hatch, R-Utah.

Richard Foster, chief actuary for the Centers for Medicare and Medicaid Services, said Congress still must find a way to avoid a proposed 30% cut in payments to doctors over the next three years. He added that most health care providers aren't likely to improve their productivity as much as forecast by the law.

"The financial projections shown in this report for Medicare in Michigan and elsewhere do not represent a reasonable expectation for actual program operations," Foster wrote. "The recession adds a significant further element of uncertainty to the trust fund projections."

The Medicare trustees' report and another on Social Security included good and bad news:

•Medicare's projected solvency until 2029 and Social Security's until 2037 give Obama and lawmakers time to come up with long-term solutions to the looming problem of an aging society, a shrinking workforce and rising health care costs.

"The heavy lifting remains," said Robert Greenstein, executive director of the liberal Center on Budget and Policy Priorities. "Nevertheless, this is a very important improvement."

•Both programs, however, will lose money this year because the recession has reduced payroll tax revenue, while benefits to a growing number of retirees still must be paid. By 2015, every year will be written in red ink.

Treasury Secretary Timothy Geithner called the long-term prospects for the two programs "very encouraging." He lauded the health care law for making "substantial improvements in the rate of growth in health care costs," but added, "They have to be allowed to work. Congress will have to stick with them."

The two reports make one fact indisputable: the inexorable aging of the Baby Boom generation will drain the trust funds eventually unless Congress intervenes. Medicare, with 46 million beneficiaries, and Social Security, with 53 million, will only grow in coming years as the number of workers supporting them declines. In Michigan, residents rely on both programs when they cannot afford Michigan health insurance.

Social Security will pay out more in benefits than it gets in payroll taxes this year and next, and eventually run deficits every year starting in 2015. Medicare went into the red two years ago.

"The Democratic Congress needs to understand that from a cash flow standpoint, the crisis is upon our doorstep," said Sen. Judd Gregg, R-N.H. "As of this year, both of these massive entitlement programs will have more going out than coming in."

Still, the Social Security trust fund won't run dry until 2037, the trustees said, the same projection that was issued last year. At that point, its income would support about 75% of scheduled benefits through 2084.

Both programs are being examined by an 18-member, bipartisan commission charged with finding ways to cut the federal government's $1.5 trillion budget deficit and $13.3 trillion debt. The panel is due to report in December, with possible congressional action to follow.

Already, defenders of Social Security are lobbying against precipitous changes to the 75-year-old New Deal program, such as benefit reductions or an increase in the retirement age, now headed to 67.

"Social Security's promised benefits are fully affordable without benefit cuts and without increasing the retirement age," said Nancy Altman of the Strengthen Social Security Campaign. "The biggest threat to Social Security is the politicians in Washington who continue to play politics with this issue."

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