Government estimates for the long-term solvency of Medicare
and Social Security were little changed from one year ago, reflecting general
improvement in health-care cost growth and a disability-insurance program that
faces imminent depletion. An annual report card Wednesday from the trustees of
both programs underscored how the Social Security disability-insurance program
is nearly broke. Trustees said the program will be able to pay only partial
benefits by late 2016 unless Congress intervenes, repeating a forecast made one
year ago.
Social Security’s much larger retirement-benefit program
faces depletion in 2034, one year later than projected last year. Both the
disability insurance trust fund and the retirement-benefit fund raise money
from a 6.2% payroll tax on both employees and employers.
President Barack Obama has proposed increasing the
portion of payroll taxes that go to the disability fund, a reallocation that
would leave both funds depleted in 2033. Congress has done similar
reallocations in the past, most recently in 1994.
Republicans in Congress have said they won’t allow any
transfer without taking other steps to improve Social Security’s overall
finances. Rising labor-force participation among women and an aging workforce
have contributed to an increase in the number of disability beneficiaries.
Around 6% of workers who were eligible for disability insurance claimed those
benefits in 2013, up from 4% in 2001.
Meanwhile, the report said Medicare’s hospital-insurance
program, which insured around 1.5 million more people last year than in did the
previous year, will be able to pay full benefits for elderly and disabled
patients through 2030. The estimate is unchanged from last year’s projection. As
recently as 2009, trustees had estimated that the hospital-care fund would be
depleted by 2017.
Projections for the solvency of Medicare have consistently
improved in recent years amid a slowdown in the growth of health-care costs.
Compared with last year’s forecasts, the projections for Medicare’s total costs
were little changed over the next 20 years but are considerably lower over the
long run due to technical and policy changes.
Once trust funds run out of reserves, the government can
only pay benefits from revenues it collects, largely from taxes, which would
result in cuts from current benefit levels. The report could ease pressure on
the White House and Congress to make immediate changes to Medicare, but it does
little to change the long-run entitlement picture. The two programs accounted
for 42% of federal spending last year, up from 36% in 2011, and the costs are
estimated to rise as the baby boom generation ages.
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