WASHINGTON--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. (Source: The Wall Street Journal)
Story Date: July 22, 2015