Outlook for Medicare Improves in 2010

Aug 15th, 2010 | By | Category: Social Security & Medicare

The Trustees of Social Security and Medicare funds released the 2010 Annual Reports for each program.  The results are summarized here:

  1. The outlook for Medicare has improved substantially because of program changes made in the Patient Protection and Affordable Care Act as amended by the Health Care and Education Reconciliation Act of 2010 (the “Affordable Care Act” or ACA).
  2. The Hospital Insurance (HI) Trust Fund is now expected to remain solvent until 2029, 12 years longer than was projected last year,

    and the 75-year HI financial shortfall has been reduced to 0.66 percent of taxable payroll from 3.88 percent in last year’s report. Nearly all of this improvement in Part A (hospital insurance) finances is due to the ACA.
  3. The ACA is also expected to substantially reduce costs for the Medicare Supplementary Medical Insurance (SMI) program; projected program costs as a share of GDP over the next 75 years are down 23 percent relative to the costs projected for the 2009 report.
  4. Productivity growth in the health care sector can match that in the economy overall, rather than lag behind as has been the case in the past.
  5. The improvement in Medicare’s finances projected in this report highlights the importance of making every effort to make sure that ACA is successfully implemented. 
  6. While the financial outlook for Medicare in this year’s report is substantially improved relative to last year, further reforms will be needed.
  7. The financial outlook for Social Security is little changed from last year. The short term outlook is worsened by a deeper recession than was projected last year, but the overall 75-year outlook is nevertheless somewhat improved primarily because a provision of the ACA is expected to cause a higher share of labor compensation to be paid in the form of wages that are subject to the Social Security payroll tax than would occur in the absence of the legislation.
  8. The Disability Insurance (DI) Trust Fund, however, is now projected to become exhausted in 2018, two years earlier than in last year’s report. Thus, changes to improve the financial status of the disability program are needed soon.
  9. Social Security expenditures are expected to exceed tax receipts this year for the first time since 1983.
  10. The long-run financial challenges facing Social Security and those that remain for Medicare should be addressed soon.

The conclusion of the Trustees Report is quoted here:

“The ACA makes significant progress toward making Medicare financially viable. But while it is projected that the Medicare HI(hospital insurance) Trust Fund is adequately financed until 2029, and the Social Security OASI and DI (disability insurance) Trust Funds are adequately financed until 2040 and 2018, respectively, the significant longer term financial imbalances of the programs still need to be addressed. The sooner action is taken to address the long-run financial imbalances, 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.”  (parentheses added for clarity)

SCJ readers are encouraged to read the report in its entirety.  Social Security and Medicare are social insurance programs that benefit senior citizens, and we must understand the truth about these programs, and not be led by lies and distortions that are rampant in public media today.  Some media pundits take advantage of seniors’ fears about our financial future and health conditions; we must not allow them to prey on our vulnerabilities with lies.  We must do our due diligence and find the truth amidst fear-mongering.



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