The Bush administration issued a report on Tuesday which forecast that Medicare’s hospital insurance trust fund would be exhausted in 2019, while Social Security’s reserves would be depleted by 2041.
According to The New York Times, the administration also said the condition of the programs had not significantly deteriorated since last spring.
Treasury Secretary Henry M. Paulson Jr., the managing trustee of Medicare and Social Security, said Medicare’s hospital insurance trust fund would pay out more in benefits than it receives in taxes and other dedicated revenues this year while Social Security costs would exceed tax revenues starting in 2017.
The government will then have to draw on assets of the Social Security trust fund — special government bonds — to meet its obligations to retirees, the trustees said.
The first of the 76 million baby boomers began receiving Social Security retirement benefits this year and the number of beneficiaries will grow much faster than the number of workers paying taxes, creating financial difficulties for the program, the NY Times reported. Social Security would still receive tax revenues and could pay 78 percent of promised benefits if the trust fund ran out of money in 2041 as predicted, the trustees said.
While the programs’ trustees foresee a steep increase in doctors’ services and other outpatient care costs, but they said that the Medicare trust fund set up to pay for those services would not run out of money because, under federal law, it had access to general revenue. In addition, beneficiaries’ premiums can be adjusted each year to cover about 25 percent of the expected costs of Medicare Part B, according to the NY Times.
The standard premium for Part B has increased 64 percent in the last five years now totals $96.40 a month. Under the formula set by existing law, the premium will stay at that level in 2009 and 2010, the trustees said.
But the NY Times said that the according to the report, prepared by government actuaries and economists, these projections assumed that Medicare payments to doctors would be cut by more than 10 percent in July, by an additional 5 percent in January 2009 and in each of the next seven years, for a cumulative reduction of about 40 percent,
The NY Times reported that Congress usually intervenes to block such cuts and, in recent years, has approved small increases for doctors, thus increasing the costs of Part B and beneficiaries’ premiums.