Health overhaul helps Medicare prospects: report

WASHINGTON (Reuters) - Prospects for the U.S. Medicare retiree health program brightened significantly from last year as a result of cost cuts resulting from healthcare reform legislation, a government report said on Thursday.

The Medicare hospital trust fund is not projected to exhaust its funds until 2029, 12 years later than forecast last year, according to an annual report.

However, the deep recession ate into receipts for another major program for retired Americans, Social Security, helping push it into deficit for the first time in 27 years, the same report from the two programs' trustees said.

In the long run, Social Security, which was benefiting 53 million Americans at the end of 2009, was due to exhaust its reserves in 2037, the report said, the same date as was projected in last year's assessment.

The yawning U.S. budget deficit and the Obama administration's healthcare overhaul are among politically polarizing issues in November mid-term elections.

The administration hailed Medicare's improved finances, and some smaller benefits to Social Security, as a dividend from healthcare reform, while critics cited the financial problems facing the two retiree programs as evidence of grave fiscal problems.

"The impact of healthcare reform is made clear by the trustees reports, which show some very positive developments for Social Security and especially Medicare," Treasury Secretary Timothy Geithner, one of the trustees, said at a press conference.

The top Republican on the Senate Budget Committee, Judd Gregg, said the administration should focus on cash shortfalls in Medicare and Social Security instead of how far off in the future the programs' funds will expire.

"The crisis is upon our doorstep," he said in a statement. "As of this year, both of these massive entitlement programs will have more going out than coming in."

Social Security accounted for about $678 billion, or 20 percent of the U.S. budget in the 2009 fiscal year, while Medicare and its companion Medicaid healthcare program for the poor claimed $676 billion.

Although the financial difficulties facing the two programs have been apparent for years, politicians have been unable to agree on how to put them on sounder footing. Lawmakers have been reluctant to cut benefits or raise taxes or set aside enough revenue to keep them running at current levels.

HEALTH SAVINGS

The report said cost savings to the Medicare program would come through reductions in projected payment increases to hospitals and healthcare providers in coming years.

However, over the past several years, Congress has regularly blocked cuts in planned Medicare payments to physicians.

Health and Human Services Secretary Kathleen Sebelius acknowledged the administration would need to strike a balance between the controversial pay adjustments, which could drive some healthcare providers away from the Medicare program, and the need to reduce costs to ensure the long-term health of the program.

The funds' trustees urged lawmakers to address the looming financial problems of the programs soon. In addition to Sebelius and Geithner, trustees include Labor Secretary Hilda Solis.

The Medicare report acknowledged the softening recovery will add an additional obstacle to the financial health of the programs. The report assumed a return to full employment will not happen until 2017, two years later than projected last year.

After a painful recession, the U.S. budget deficit is expected this year to top the record $1.41 trillion hit in 2009, and the national debt has reached $13 trillion.

The annual report is usually released in April or May but the trustees delayed publication to study how the fate of the programs would be affected by recently passed healthcare reform legislation.

A blue ribbon bipartisan commission is due to make recommendations by December about how to improve the long-range state of U.S. finances, and is expected to offer thoughts on how to put the two programs on sounder long-term footing.