Agreement Is Seen as Short-Term Relief for Medicare and Social Security

WASHINGTON — The budget agreement reached by congressional leaders and the White House this week will prevent a sharp increase in Medicare premiums for more than 15 million older Americans and a deep cut in Social Security benefits for nine million disabled workers, but it will not alter the long-term financial outlook for either program, lawmakers and budget experts said Tuesday.

AARP, a lobby for older Americans, praised the agreement on Tuesday, though it said the legislation “will not provide a long-term solution to the funding challenge facing the Social Security disability insurance trust fund.”

Without action by Congress, some Medicare beneficiaries were facing an increase of more than 50 percent in their standard monthly premiums, to about $159, from the current amount of a little less than $105.

Instead, if the budget agreement is approved by Congress, the basic Medicare premium would rise in January to $120 a month for about 30 percent of beneficiaries. The annual deductible, now $147, would increase to about $167 for all beneficiaries, rather than the $223 projected under current law.

About 70 percent of Medicare beneficiaries will not see any increase in their Medicare premiums next year because of a provision of federal law that links premiums to Social Security benefits, which will be frozen in 2016 after a year of unusually low inflation — a byproduct of plummeting gasoline prices. For the third time in 40 years, Social Security will not provide a cost-of-living adjustment in benefits next year.

To make up for the fact that most Medicare beneficiaries will not pay higher premiums next year, the Treasury will provide an infusion of general revenue to Part B of Medicare, which covers doctors’ services, outpatient hospital services and some home health care.

To repay the loan from the Treasury, Medicare beneficiaries will have to pay $3 a month more in premiums over about five years, until 2021.

“This is a creative solution to smooth out increases in Medicare premiums and deductibles without having a major impact on seniors in any given year,” said Patricia H. Neuman, a senior vice president of the Kaiser Family Foundation, a nonpartisan health research organization.

“It helps soften the blow for seniors who would otherwise have seen unprecedented increases in premiums and deductibles,” Ms. Neuman said. “They will still have increases, but much smaller than seniors would have seen without this deal.”

The big increases in premiums under current law would have hit certain high-income people, beneficiaries who are new to Medicare in 2016 and those who do not receive Social Security checks. Under existing law, states would have borne much of the cost because they help pay premiums for low-income people eligible for Medicare and Medicaid.

The budget agreement also provides relief to nine million workers and more than 1.7 million children who receive Social Security disability benefits.

The trustees of Social Security, including three cabinet secretaries, said in July that the disability trust fund would be depleted in the last quarter of 2016. After that, they said, benefits would automatically be cut by 19 percent because revenue, from payroll taxes, would cover only 81 percent of scheduled benefits.

The budget agreement averts that cut by temporarily reallocating Social Security payroll tax revenue from the trust fund for retired workers — $124 billion over three years — to the trust fund that pays disability benefits. The reallocation would not change the overall payroll tax rate but would allow Social Security to pay the full amount of disability benefits until 2022.

The bipartisan bill includes several provisions intended to reduce fraud in Social Security programs. For example, it would define a new felony, conspiracy to commit Social Security fraud, punishable by up to five years in prison and fines up to $250,000.

The bill would also require that initial decisions on disability claims include reviews by a medical doctor or a psychologist. Such experts do not always participate now.

Speaker John A. Boehner said the package was “the first significant reform to Social Security since 1983 and would result in $168 billion in long-term savings.” The estimated savings accumulate over 75 years.

Nancy J. Altman, the president of Social Security Works, an advocacy group that favors expansion of the program, said: “On a number of occasions in the past, Congress has reallocated money between the disability and old-age trust funds as a routine part of its responsibility, without attaching strings to the legislation. But this time, Republicans refused to pass a clean reallocation and insisted on changes in the disability insurance program.”

The budget agreement would save $9 billion over 10 years by limiting what hospitals can charge Medicare for the services of doctors whose practices they purchase in the future. In recent years, many hospitals have bought physicians’ practices and then billed Medicare at the higher rates allowed for hospital outpatient clinics.

The bill would also require manufacturers of generic drugs to provide deeper discounts to Medicaid if the prices of such drugs increase faster than inflation.