CBO adds 5 years to Medicare's solvency

The Congressional Budget Office found five more years of solvency for the Medicare program in its latest analysis, but the same report revised downward prospects for the Social Security program.

The CBO expects the Medicare program to be financially solvent through 2030, five years longer than previously estimated, due to predictions that healthcare costs will grow more slowly than prior to the recession, according to a report in the Wall Street Journal.

The CBO revised the excess cost ratio downward by nearly a percentage point, from 2.6 percent to 1.7 percent. The excess cost ration is a measure that compares the rate of growth in healthcare costs to that of the growth domestic product. As a result of that change, the trust fund balance is projected to grow from $206 billion in 2013 to $261 billion in 2024, before heading downward.

Another factor in the bending of the cost curve is ACA, which cuts more than $700 billion in Medicare expenditures.

 “It’s pretty great news, and what’s striking is that as cost increases have come down, all the quality measures have gone up,” John Rother, chief executive of the National Coalition on Health Care, a healthcare advocacy organization for business and labor, told the Journal. “We are actually doing better.”

The Medicare program is expected to spend $500 billion on benefits for 54 million Americans this year, the Journal reports. In 2030, nearly 70 million people are expected to collect benefits.

A spokesman from the office of House Budget Committee Chair Paul Ryan of Wisconsin told the Journal: “The take-away is not that the insolvency date has been pushed back, but that the program remains on an unsustainable path.”

Future prospects for the Social Security program, however, are thought to be somewhat lower than previously projected, according to the CBO analysis. Lower future payroll tax revenue and interest rates will widen the disparity between spending and revenues in the Social Security program over the next 75 years.