Medicare's Viability Extended to 2029 Following Health Overhaul, U.S. Says

Medicare will gain an extra 12 years of fiscal life as a result of the health law signed in March by President Barack Obama, a government report said, confirming the administration’s claims about the value of the overhaul.

Medicare, the U.S. government’s health plan for the elderly and disabled, will now run short of money in 2029 instead of 2017, according to the report issued today by the program’s trustees, including Treasury Secretary Timothy Geithner and Health Secretary Kathleen Sebelius.

In 2009, Medicare covered 46.3 million beneficiaries and paid $502 billion in benefits, the report said. The health law cuts payments to medical providers under the Medicare program, reduces future spending and puts in place programs such as the “Center for Medicare and Medicaid Innovation,” designed to develop future cost efficiencies.

The legislation “makes a very substantial improvement in our long-term fiscal position” Geithner said at a Washington news conference, one that is “much larger than anything we have considered, much less embraced.”

A report issued by Medicare on Aug 2 predicted the overhaul may more than double the time before the program ran out of funds. Under the health law, $145 billion is scheduled to be saved over a decade as a result of payment cuts to Medicare Advantage while $205 billion in savings will come from as a result of lower payments to Medicare providers, according to an administration report released Monday.

Photographer: David Rogowski/Bloomberg

U.S. Treasury Secretary Timothy Geithner speaks during a press conference at the Treasury Department on Thursday Aug. 5, 2010 in Washington, D.C. Close

U.S. Treasury Secretary Timothy Geithner speaks during a press conference at the... Read More

Photographer: David Rogowski/Bloomberg

U.S. Treasury Secretary Timothy Geithner speaks during a press conference at the Treasury Department on Thursday Aug. 5, 2010 in Washington, D.C.

Insurer Index Gains

The Standard & Poor’s Managed Health Care Index of six insurers climbed $2.71 to $330.44 after the report’s release.

UnitedHealth Group Inc., the private insurer administering the most Medicare plans, gained 20 cents to $33.11 in New York Stock Exchange composite trading, and Humana Inc., the second- biggest Medicare insurer, was up 28 cents to $50. UnitedHealth, the biggest U.S. health plan by sales, is based in Minnetonka, Minnesota, and Humana in Louisville, Kentucky.

The report was prepared by the Office of the Actuary, a unit of the Department of Health and Human Services. Last year’s actuarial findings showed that the trust fund had eight years remaining and wouldn’t be able to pay full benefits in 2017. Social Security, the retirement income program for people over 65, will run out of funds to pay full benefits in 2037, the same as in last year’s trustees’ report.

“Nearly all” of the 12-year increase in Medicare’s longevity is attributed to the overhaul, according to a report summary by the administration.

Medicare spending has grown steadily since its creation in 1965, and is the third-largest federal outlay behind social security and defense. It is funded through a payroll tax, general tax revenue and beneficiary premiums

Aging Population

Medicare’s finances still face long-term difficulties because of an aging population that will live longer and because of the increasing cost of medical care.

“The significant longer-term financial imbalances of the programs still need to be addressed,” said the trustees in the report summary. “The sooner action is taken to address the long-run financial imbalances, the more reform options will be available, and the more time there will be to phase in changes so that those affected will have adequate time to prepare.”

Options for funding Medicare that have been discussed in past years include cutting other programs or increasing taxes. Also, the program could raise the age at which Social Security and Medicare start providing benefits to most people from 65, or decrease the amount of those benefits.

“We’re going to have to have a debate, and we can always hope it will be civil,” Geithner said.

Bipartisan Committee

Obama has appointed a bipartisan commission to study the country’s fiscal challenges and how to solve them. Their report is due Dec. 1.

“This administration looks forward to hearing the fiscal commission’s recommendations so we can address the imbalances in these programs,” Labor Secretary Hilda Solis, another of the program’s trustees, said at the press conference.

The report, which each year estimates how many years Medicare can pay benefits before running out of money, was delayed from the usual spring release so government actuaries could assess the impact of the health law.

To contact the reporter on this story: Drew Armstrong in Washington at

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.