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U.S. Medicare outlook improves as healthcare costs ease

U.S. Medicare outlook improves as healthcare costs ease

Slower growth in U.S. healthcare costs improved the budget outlook for the Medicare program for the elderly from last year, but the fortunes of the Social Security pension program have not changed despite a better economy, trustees of the programs said on Friday.

The trustees repeated warnings to Congress to pass reforms that will enable the programs to meet all of their long-term obligations, but their report adds to recent evidence of an easing in U.S. budget pressures, and could help encourage a sense of complacency in Washington.

The main trust fund that supports the Medicare healthcare program will be depleted in 2026, two years later than forecast last year, the trustees said in their annual status report.

The trustees attributed the improvement to lower projected spending for most treatment categories, especially in skilled nursing homes, an assumption in keeping with recent signs of slower healthcare inflation.

They also said the implementation of key parts of President Barack Obama’s healthcare reform law next year will reduce costs by more than previously projected.

The report said the Social Security fund for retirees will be depleted in 2033, the same as forecast last year. But a much more pressing need is the 2016 depletion date for the Social Security’s trust fund that pays benefits to people with disabilities.

While this is also unchanged from last year’s report, it means that Congress now only has three years to agree on new funding or reforms that would avoid reduced payments to beneficiaries.

Depletion of the Medicare and Social Security trust funds does not mean that all benefits would stop. At the current rate of payroll tax collections, Medicare would be able to pay about 87 percent of costs after 2026, declining to 71 percent by 2047. Social Security would be able to pay about three quarters of its benefits through 2087, according to the report.