Medicare report carries warning

WASHINGTON — Medicare is in better shape because of President Obama's sweeping health care overhaul and will stay afloat a dozen years longer than earlier projected, trustees forecast Thursday. But that depends on cuts in care that the system's top analyst says are highly doubtful.

The annual report by the trustees who oversee Medicare and Social Security, led by Treasury Secretary Timothy Geithner, gives backers of the new health care law evidence of a positive impact on government entitlement programs, but it also undercuts the findings with a host of caveats.

In what amounted to a dissenting opinion, top Medicare actuary Richard Foster warned that the report's financial projections "do not represent a reasonable expectation" for the hospital fund for America's elderly.

Kathleen Sebelius, secretary of health and human services and one of the trustees, said they were required to assume current law in making their projections, including a cut in Medicare payments to doctors. She, too, doubted the cuts would ever happen, "which is why we continue to provide cautionary notes" in the report.

The trustees projected the Medicare Hospital trust fund would be exhausted in 2029, or 12 years later than estimated last year.

The news wasn't as rosy for Social Security, which, for the first time in decades, will pay out this year and next year more in benefits than it collects in taxes. The Social Security trust funds are expected to be exhausted in 2037, the same date as in last year's report.

More bad news for Social Security recipients: The trustees project no cost-of-living increase for Social Security recipients next year, the second year in a row with no increase. The adjustments are based on inflation.

The administration delayed the trustees report, which normally comes out in the spring, in order to recalculate projected spending estimates based on changes in the new health care law.

Geithner said that while the report showed "very positive developments" from the new health care law, it also underscored "that we must continue to make progress addressing the financing challenges" facing both Medicare and Social Security.

"Those reforms require that we achieve very substantial improvements in efficiency and productivity," he said.

Foster, the Medicare official, said in a statement included in the report that the program's projected savings might not be realistic.

The short-run projections by his office were similar to those of the trustees, estimating that the Medicare trust fund would be exhausted in 2028, one year earlier.