Saturday, June 1, 2013

Medicare Trust Fund to Last Longer Than Expected; Social Security Trust Fund Expected to Last at Least Another 20 Years

Conservatives Devastated – Wanted Medicare to Die a Natural Death

The Trustee of the Social Security and Medicare systems annually announce the expected life of the trust funds that support the two systems.  This year there was good news for everyone, well almost everyone.  On Medicare there was this.

Lower health-care costs are improving the financial outlook for Medicare, the federal health program for the elderly, extending the life of the trust fund that supports the program until 2026 — two years later than previously forecast.

The new projection, released Friday by the Social Security and Medicare Board of Trustees, is an improvement of nine years in the forecast since passage of President Obama’s Affordable Care Act. The trustees’ report credits the act with part of the cost slowdown, particularly by placing new limits on Medicare Advantage, a form of Medicare run by private insurers.

However, the trustees also credit lower costs and use rates in “most ... service categories — especially skilled nursing facilities,” a development that most economists believe is in part due to the recent recession, but also to more fundamental efforts to reduce costs throughout the health-care industry.

Conservatives have been counting on the death of the Medicare Trust Fund, which funds only one part of Medicare, to spur a change which would turn Medicare over to private insurance companies, you know, the companies that are just bending over backwards to see that their policy holders get all the medical care they need.

On Social Security the news was neutral.

The trustees reported no such improvement in the finances of Social Security, but no significant deterioration, either. The combined trust fund that finances both the disability benefits and the retirement benefits funds is still forecast to run out in 2033, at which point the programs would only have enough cash to pay about three-quarters of scheduled benefits.

But notice that the SS system does not go bankrupt.  The worst case scenario, benefits are still at 75% of scheduled amounts.  This is not good, but not a situation where everybody on Social Security gets nothing, which is the scenario the doomsayers put out there.

The bad news continues to be the Disability Fund.

 Congress must act to shore up the trust fund for disability benefits, which is still projected for depletion in just three years.

but a relatively small amount of general financing should do the job unless of course Conservatives, whose position is that people who cannot afford to have disabilities should not choose to get them, prevail.

Also everyone should remember that these are point estimates, the expected value of a probability distribution of the models that project revenues and expenses.  So in the real world, the one everyone lives in these estimates are probably going to be wrong.  We just don’t know in which direction they will be wrong. 

So stay tuned for next year’s numbers, and the year after that and the year after that . . .  When the systems do exhaust their funds we’ll let you know.

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