Social Security, Medicare woes still loom large

WASHINGTON – Social Security and Medicare continue to face grave financial challenges even though the new health care law may provide added stability to the two massive programs, according to the government’s annual review.

This year, for the first time since 1983, Social Security is projected to pay out more in benefits than it collects in taxes.

And Medicare confronts a new test as the health care law envisions using billions of dollars of projected savings over the next decade to expand medical coverage for younger Americans.

The report, released Thursday by the Social Security and Medicare trustees, estimated that the Social Security trust fund used to pay retiree benefits will remain solvent until 2037, the same outlook as last year.

And it predicted that the Medicare fund covering hospital services for the elderly, which government officials last year said would run out of money in 2017, could now stay in the black until 2029.

Senior administration officials and Democrats on Capitol Hill hailed that as validation of what House Speaker Nancy Pelosi, D-Calif., called the “remarkable impact of health reform.”

But the outlook for Medicare is still extremely cloudy, according to budget experts, including the program’s chief actuary, Richard S. Foster.

As a result of the new health care law, Medicare, which provides health insurance to more than 45 million mostly older Americans, will undergo significant changes in coming years that many experts believe will make it more efficient.

The health care law does not guarantee that the program will be able to keep all the anticipated savings, however. That means that unless Congress finds more money, Medicare could run out of funds much more quickly than Thursday’s report predicts.

“It sounds like Medicare is in much better shape than it is,” cautioned Robert Bixby, executive director of the Concord Coalition, a nonpartisan budget watchdog group.

Bixby pointed to the fundamental problem of using Medicare savings to expand coverage. “You can’t spend the same money twice,” he said. “And since all that money is used for something else, it won’t be available to pay Medicare benefits. We are basically no better off.”

Further complicating Medicare’s future, it is unclear whether many of the initiatives in the new health care law will yield the projected savings.

The law calls for a series of cuts to hospitals and other medical providers that are designed to reflect increased efficiency in the system and the growing number of Americans projected to get health insurance starting in 2014.

But Medicare’s independent actuaries have raised questions about whether Congress will go through with these cuts in future years in the face of political pressure from the health care industry.