Medicare Held Safe to 2005; Social Security Gains

WASHINGTON â€”  Medicare’s fortunes have improved and its trust fund is not likely to run out of cash until the year 2005, and the Social Security old age fund should be solvent until the middle of the 21st Century, the systems’ trustees told Congress on Friday.

The 2005 date is three years later than was forecast a year ago.

The trustees, including three Cabinet members, said Social Security’s old age fund also had achieved robust gains and they predicted that it “will have enough funds to cover expenditures for about 60 years into the future.�

The board said Medicare’s trust fund grew by nearly $14 billion in calendar 1987 and finished the year with reserves of $53.7 billion.

Assuming moderate economic conditions, the hospital insurance reserves were forecast to grow to nearly $153 billion during the next decade before dwindling to nothing in the year 2005.

Congressional Action Urged

The trustees urged Congress to “take early remedial measures to bring future (Medicare) costs and finances into balance� and to “avoid the need for later, potentially precipitous changes.�

In the early 1980s, the trustees had said Medicare’s trust fund would go bankrupt in the 1990s. But its financial position has improved, partly as a result of federal constraints on hospital payments.

The Medicare program provides hospital insurance for 28 million Americans age 65 or older and for 3 million disabled workers under 65. The old age and disability program provides monthly checks to 38 million workers, paid for primarily by payroll taxes on 130 million workers and employers.

Otis R. Bowen, secretary of health and human services, said the old age and disability funds “will increase significantly over the next several decades. These reserves will be needed to meet the financial obligations of the program in the next century, when the young workers of today become eligible for Social Security.�

The plan is to dig into that reserve over the succeeding three decades to help pay the baby boomers’ retirement “until the funds are exhausted in 2048.� Then, the system would need to raise taxes or lower benefits to stay on an even keel.