Lower costs extend Medicare trust fund

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

The new projections, released Friday by the program’s trustees, credit President Barack Obama’s Affordable Care Act in part for the improvement in the finances of the federal health insurance program for the elderly. The act’s limits on Medicare Advantage, a more expensive form of Medicare run by private insurers, are proving more effective than previously forecast, the report said.

The trustees also cited lower-than-expected spending in “most … service categories — especially skilled nursing facilities,” a development that is not well understood. Costs have been slowing throughout the health-care industry, due in part to the recent recession, economists say, but also because of what appear to be more fundamental changes aimed at reducing waste and improving results.

The trustees reported no such gains in the finances of Social Security, but no significant deterioration, either. The Social Security trust funds will have enough cash to pay full retirement and disability benefits until 2033, the report said.

Both programs still face huge long-term financial problems as the baby-boom generation retires. And on Friday, analysts worried that the sunnier projections, together with an improving economy and a rapidly shrinking federal budget deficit, could serve to further dampen enthusiasm in Washington for tackling the nation’s toughest fiscal problems.

“To me, that’s the real loss of all this good news,” said Paul Ginsburg, president of the Washington-based Center for Studying Health System Change. “I don’t think anyone except the most extreme person, seeing these trends, thinks the Medicare cost problem has been solved. But the way politicians are, it does tend to take the pressure off.”

At a news conference to release the report at the Treasury Department, top administration officials pledged to do more to control costs even as they hailed the early success of the president’s signature health-care initiative. The Affordable Care Act has come under sustained attack since its passage in 2010 from Republicans who accused Obama of raiding Medicare to help pay for an expansion of health coverage for the uninsured.

The Affordable Care Act indeed aimed to slice roughly $700 billion in savings from Medicare over a decade, mainly through cost controls for providers. The result since its passage, Health and Human Services Secretary Kathleen Sebelius said, has been to extend the life of the trust fund that pays hospital bills by nearly a decade.

“Today’s trustee report confirms that the ACA is continuing to strengthen Medicare and ensure its solvency for future generations,” Sebelius said, noting that the administration had advanced that goal “without eliminating a single guaranteed benefit.”

With Medicare spending per person now rising at the historically low rate of 1.7 percent a year, Sebelius said, seniors can also expect to profit: Preliminary estimates show Medicare premiums will not rise “a single dime” for 2014.

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