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Falling Healthcare Costs Drive Improvement In U.S. Budget Outlook

WASHINGTON — Lower hospital and nursing costs improved the budget outlook for the U.S. government's healthcare program for the elderly over the past year, but the fortunes of the Social Security pension program have changed little, the programs' trustees said on Friday.

Despite the improvement for Medicare, the trustees reiterated their longstanding view that neither program can meet projected long-term obligations without changes from Congress, and urged action as soon as possible.

They said the Social Security fund for retirees will become insolvent in 2033, the same as a projection made last year.

The main trust fund that supports the Medicare healthcare program will run out of money in 2026, two years later than last year's forecast.

The benefits programs represent the two largest federal expenditures and account for about one-third of all U.S. fiscal outlays. The reports will feed into bitter arguments between Democrats and Republicans over how to reform the programs to keep them solvent and able to support the needs of the massive Baby Boom generation that is now starting to retire.

U.S. Treasury Secretary Jack Lew said the reports support Democrats' approach of protecting the basic structure of Social Security and Medicare, while reducing healthcare costs and asking wealthier seniors to contribute more.

While the Obama administration wants to work on bipartisan reforms to strengthen the programs' financial footing, Lew said "changes to Social Security and that involve deep cuts in benefits or privatization will be unacceptable."

Republicans in the House of Representatives, meanwhile, have proposed massive long-term changes to Medicare that would effectively convert the popular fee-for-service program into a voucher-like system that provides a subsidy to seniors to buy private health insurance.

The report found that the improvement in the outlook for Medicare's Hospital Insurance Trust Fund was due to lower projected spending for most treatment categories, in line with a recent trend of lower healthcare costs.

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