The Affordable Care Act – the health insurance reform law enacted back in March, “substantially improves” the financial outlook of Medicare, according to an annual report from the Social Security and Medicare Boards of Trustees. According to the report, Medicare, the federal health program for the elderly and disabled, will remain solvent until 2029 - 12 years longer than was projected a year ago.
The healthcare law is expected to save $145 billion over a decade through payment cuts to Medicare Advantage, which is private insurance for the elderly. Reduced payments to Medicare providers will save another $205 billion, according to the latest official figures.
In response to the report the White House blog posted the following, “Today, we got more good news about the Affordable Care Act, the new law that will give seniors better benefits and save Medicare $575 billion over the next ten years. Many savings provisions in the new law kick in immediately, totaling about $8 billion in just the first two years. That’s real money, even in Washington, and it’s money we're saving by cutting waste, fraud and abuse and making Medicare more efficient -- not by changing seniors' guaranteed Medicare benefits. In fact, we’re making benefits for seniors even better. In the coming years, seniors will save an average of $200 per year in premiums and more than $200 in coinsurance, and we’ll completely close the Medicare prescription drug gap known as the “donut hole.’
Meanwhile, just days before it’s 75th anniversary, the Trustees announced that Social Security is expected to run a deficit this year - the first since 1983, largely as a result of high unemployment and recession.
Longer term however, the Social Security trust fund is projected to make up the difference between what the system takes in and pays out until 2037, when it would be depleted. At that point, Social Security tax revenues should still be able to pay 75% percent of the program’s obligations through 2084, according to the report’s findings, which were relatively unchanged from last year.
"The recession has, however, somewhat worsened Social Security' s very near term outlook. Benefit payments are expected to exceed tax revenue for the first time this year, six years earlier than was projected last year," Secretary of the Treasury and Managing Trustee, Timothy Geithner said in a statement. "But the improving economy is expected to result in rough balance between Social Security taxes and expenditures for several years before the retirement of the baby boom generation swells the beneficiary population and causes deficits to grow rapidly," he added.
Republicans have argued that spending cuts in the health care law will actually undermine Medicare. Government analysts have also questioned whether some of the cuts are politically sustainable.
Meanwhile, voters remain skeptical that the Social Security system will pay them all of their promised benefits. In fact a recent Rasmussen Reports poll, 58% of Americans said they lack confidence in the ability of Social Security to pay all their benefits - a political dilemma facing Democrats leading up to the fall congressional elections.
Looking ahead both programs will continue to face intense pressure as the population ages and health care costs rise. The trustee’s report concludes the sooner action is taken to address the long-run financial imbalances of Social Security and Medicare, the more reform options will be available, and the more time there will be to phase in changes so that those affected will have adequate time to prepare.