Watch CBSN Live

New Life For Medicare

Medicare, a lifeline for 40 million elderly Americans, is itself on life support. But America's booming economy gave it a shot in the arm Tuesday, reports CBS News Correspondent Anthony Mason.

The patient is still critical. The Medicare trust fund is still hemorrhaging money. But the insolvency date, at 2001 two years ago and 2008 last year, has now been rolled back to 2015.

Health and Human Services Secretary Donna Shalala said "In the last two years, we have extended the life of the trust fund by a full 14 years and cut the actuarial deficit by 66 percent."

Shalala also said that Social Security's insolvency date has also been pushed back, by two years, to 2034.

It's the economy that's come to the rescue. Low unemployment has meant more workers are contributing to the programs. Low inflation has meant smaller cost-of-living benefit increases and cheaper healthcare costs.

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

Because most members of the huge Baby Boom generation - people born from 1946 through 1964 - are still working, Social Security now collects more payroll taxes than are needed to pay benefits to current retirees. The surpluses are invested in government bonds.

The program will not need to start cashing in those investments until 2014, a year later than estimated in 1998, trustees said. At that time, Baby Boomers will have begun retiring. It's projected that the taxes paid by those left in the work force will not cover Baby Boomers' benefits.

"This really is a remarkable transformation we have had," said Treasury Secretary Robert Rubin.

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

Some experts speculate the good news will make lawmakers contemplating changes to Social Security and Medicare feel less pressure to rush into any dramatic changes.

President Clinton and Republicans in Congress have pledged to try to make changes aimed at strengthening both programs this year.

So far, however, little agreement exists about how best to do that. Among the options: adding more money from government surpluses or from tax increases; trimming benefits; raising the retirement age; or partially privatizing the programs.

But analysts say the problems are still there and facing up to them is inevitable.

Gail Fosler of the Conference Board said, "It's like the train that's headed towards you in the tunnel slowing down, but it's still headed in the same direction."

Everyone agrees reform is needed. The debate is over how to do it. As the health secretary put it today, we may have more time, but we don't have a minute to waste.