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Slower U.S. healthcare cost rise extending life of Medicare fund: trustees

By Jason Lange and David Morgan

WASHINGTON (Reuters) - Tamer spending at U.S. hospitals and expected savings from President Barack Obama's healthcare overhaul are shoring up the funding outlook for the Medicare program for the elderly, trustees of the program said on Monday.

Medicare's trust fund for hospital bills will run out of money in 2030, four years later than previously estimated, the trustees said in a report. The trustees, however, reiterated a warning that the Social Security program would run out of money to fully pay disability benefits by 2016 and could not meet all of its obligations on pensions after 2033.

The report gives mixed messages about the urgency of reforming America's biggest social welfare programs, which together make up about 40 percent of federal spending.

While the arrival date for Medicare's crunch has been pushed into the future, an aging population is already stressing the finances of programs that provide income for the disabled.

"The long-term picture this year looks very similar to last year's report. The short-term picture has grown more urgent," Charles Blahous, the lone Republican on the board of trustees, said at a news conference.

U.S. Treasury Secretary Jack Lew, who is one of the trustees, said the disability program could be temporarily patched up by Congress redirecting revenues from another Social Security fund. That would buy time to work out a long-term solution, he said.

A partisan divide in Washington has made major reforms of Medicare and Social Security appear nigh impossible in recent years. Republicans want to rein in government spending, while Lew said Obama will not support any proposal that hits current beneficiaries or that slashes benefits for future retirees.

The trustees said the Medicare hospital fund would last longer than previously thought because "expenditures in 2013 were significantly lower than the previous estimate." They said it wasn't clear how much of the slowdown was because of a weak economy and how much was due to Obama's healthcare overhaul, which is expanding insurance coverage. Nevertheless, the trustees said they expected "substantial" savings from Obamacare.

The trustees said congressional action was still needed to address long-term solvency in Medicare and Social Security.

"The sooner the policymakers address these challenges, the less disruptive the unavoidable adjustments will be," said trustee Robert Reischauer, a former director of the Congressional Budget Office.

The report's conclusions largely mirrored those made earlier this month by the nonpartisan CBO, which also pushed back to 2030 its projection of when Medicare's main trust fund would be exhausted.

Depletion of the Medicare and Social Security trust funds does not mean that all benefits would stop. At the current rate of payroll tax collections, for example, Medicare would be able to pay about 85 percent of costs in 2030.

Social Security would be able to pay about 80 percent of disability benefits starting in "late 2016," the Treasury Department said in a statement.

(Reporting by Jason Lange and David Morgan; Editing by Andrea Ricci and Cynthia Osterman)

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