Medicare Hospital Benefits Fund Grows, Still May Be Gone in 2002

The Social Security fund that covers Medicare hospital benefits grew last year but still could go bankrupt shortly after the year 2000, the fund’s trustees reported Tuesday.

The Hospital Insurance Trust Fund, which pays for inpatient care for the elderly and long-term disabled, will run out of money in 2002 if factors such as economic growth, inflation, unemployment, birth and death rates take a moderate course. Last year, the trustees reported to Congress that the fund could run out of money in 1996.

But one trustee, Health and Human Services Secretary Otis R. Bowen, chose to emphasize the small gain of last year in an optimistic view of the study. “This report provides strong new evidence that we are on the right course. We have made . . . progress, but continuing budget restraint will be required if we are to achieve trust fund solvency,” he said.

‘Action Is Essential’

Nevertheless, the report urged Congress to bring hospital insurance costs and financing into balance, saying that “early corrective action is essential . . . to avoid the need for later, potentially precipitous, changes.”

The report calculated that, for the hospital fund to remain solvent for the next 25 years, benefits would have to be reduced 13% or Medicare contributions from Social Security payroll taxes increased 15%.

In addition, the trustees said the supplemental fund that pays for doctors’ fees and outpatient hospital services is financially sound, but they expressed concern about the cost of the program, which is doubling every five to six years.

Under figures cited by Bowen, the hospital trust fund--which ended calendar year 1986 with a $40-billion surplus--will continue to build reserves until 1994, when the trend will turn and disbursements will start exceeding income.

Once that starts, the report predicts, the fund will go from a $102.7-billion surplus at the end of 1994 to zero in just eight years.