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Longer Life For Retirement Programs

The strong economy has delayed the projected insolvency date of the Medicare trust by eight years, to 2023, and the Social Security fund by three years to 2037, trustees of the programs said Thursday.

It marked the third consecutive year that stronger-than-expected economic growth has added new years of life to the retirement programs.

Medicare, the health insurance program for the elderly and disabled, had been projected to run out of cash in 2015, according to last year's update. That was moved to 2023 in this year's estimate.

The Social Security insolvency date was moved in the new projections to 2037, compared to an estimate of 2034 last year.

The Social Security insolvency date had been extended last year by two years and in 1998 the government had announced a three-year extension for Social Security.

Medicare had been projected to run out of cash in 2001. Two years ago that date was moved to 2008 and last year it was moved farther into the future until 2015.

Also significant, this year the program's trustees estimated that the strong economy means that Medicare will take in more money than it has to pay out until 2010, when it will have to start dipping into the trust fund to pay bills.

Before the boost in the strong economy, Medicare had already started to dip into the trust fund to meet current obligations.

This year's good news could wipe out what little drive remains in Congress to risk changing the nation's popular pension program and elderly health care programs in a hard-fought election year.

"I think politically, you will find a lot of people that don't want big reforms to the programs will latch on to the trustees report and say 'Aha, we don't need to do anything,'" said Robert Bixby, executive director of the Concord Coalition, which promotes federal budget discipline.

Stronger-than-expected economic growth has added new years of life to the retirement programs in recent years, even as lawmakers have debated what to do about projections that they will ultimately be overwhelmed by the huge baby boom generation -- the 77 million Americans born between 1946 and 1964.

"I think the message is that we don't need to be stampeded into action by imminent financial collapse. We should carefully consider in what ways the structure (of retirement programs) should be retained and what ways it should be changed," said Henry Aaron, an economist at the Brookings Institution think tank.

Give or take a few years, however, a day of reckoning still remains, said Robert Reischauer, a former director of the Congressional Budget Office.

"Sooner or later the nation is going to have to restructure Social Security and Medicare and the longer we wait to take on that challenge, the more wrenching those adjustments will have to be," said Reischauer, now head of the Urban Institute.

Economic factors contributing to the brighter prospects for Socil Security and Medicare last year included the lowest unemployment rate in 30 years. With more Americans working, more are also paying the payroll taxes that support the two programs, padding their balance sheets.

Low inflation also saves Social Security money because yearly cost-of-living raises to retirees are smaller.

In addition, Medicare spending decreased slightly in 1999, by about 1 percent -- the first decline in the program's history. Experts attributed it to restrained inflation, cuts mandated by Congress in 1997, and a crackdown on fraud and billing errors.

Medicare spending is not expected to continue to fall, however, mainly because the nation's elderly population is growing. Other factors also could temper the optimism of the traditionally conservative trustees, who include the secretaries of labor, treasury and health, plus the Social Security commissioner and private gurus.

A private advisory panel last fall recommended, for example, that the trustees boost their current assumptions for Americans' increasing life expectancy. That would tend to dampen financial forecasts because people who live longer cost retirement programs more.

Social Security is the largest federal benefit program, sending checks to 44 million Americans. In addition to payments to retirees, Social Security also makes payments to disabled people and to the survivors of workers who die young.

Medicare, which provides health coverage for 39 million elderly and disabled Americans, already is spending money from a dwindling trust fund to pay hospital benefits. Outpatient benefits provided by the program are paid for separately, however, with income taxes and participants' monthly premiums.