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Social Security to pay out more in 2010 than it takes in

Social Security intake from tax revenue will fall below program costs this year. In annual reports on the fiscal health of Social Security and Medicare, Obama administration cites 'work left to do.'

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But the Affordable Care Act, which President Obama signed in March, has many provisions whose impact is hard to predict.

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Under the reforms, large Medicare savings are expected as a result of hospitals becoming more efficient and, thus, having smaller growth in costs. If those productivity savings aren't big enough to match the law's pricing constraints on hospitals, health-care providers could start dropping out of the Medicare program. "They would eventually become unwilling or unable to treat Medicare beneficiaries," the report says.

Conversely, the law could result in positive surprises on the cost front. Secretary Sebelius said that if a stepped-up focus on disease prevention bears fruit, it would bring projected Medicare costs down.

One major uncertainty revolves around a so-called "doc fix," an allowance for rising doctor fees that Congress has been approving annually. Key numbers in the report assume that the growth in doctor payments is constrained in the future. Thus, "the actual future costs for Medicare are likely to exceed those shown," the report says.

That issue, coupled with the possibility that Medicare has limited success in holding down payments to hospitals, could push Medicare spending to roughly 11 percent of the nation's gross domestic product (GDP) by 2084, up from 3.5 percent last year.

Such growth in Medicare costs would be similar to what was projected under the pre-Obama law last year. "Growth [in costs] of this magnitude, if realized, would substantially increase the strain on the nation’s workers, the economy, Medicare beneficiaries, and the Federal Budget," the new report says.

Similarly, the Social Security program will require new steps to ensure its solvency, budget experts say.

Among the ideas that some budget experts have raised: boosting the age for people to qualify for benefits, and removing a cap on Social Security taxes for high-income Americans.

Obama has created a bipartisan fiscal commission charged with coming up with proposals to tame federal deficits and debt. Proposals to fix Social Security could be among its recommendations, alongside things like tax reform and triggers designed to curb federal spending overall. Not since 1983 has revenue from Social Security taxes fallen short of outlays to seniors.

The new numbers on Social Security and Medicare arrive as Republicans are mounting a midterm election challenge to Democrats' control of Congress. Arguments that Obama health reforms are misguided have become a central theme for Republicans.

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