Medicare Fund Expected to Be Safe Till 2005

Medicare’s fortunes have improved and its trust fund is now likely to have cash reserves until the year 2005, the system’s trustees said today.

That is three years better than the trustees forecast last year.

The trustees of the Social Security and Medicare programs, including three Cabinet members, also reported big gains for the Social Security old age and disability trust funds. The trustees said they “will have enough funds to cover expenditures for about 60 years into the future.”

The board said Medicare’s trust fund grew nearly $14 billion in calendar 1987 and finished the year with reserves of $53.7 billion.

Assuming moderate economic conditions, those hospital insurance reserves are forecast to grow to nearly $153 billion over the next decade before running out of money by the year 2005.

The trustees urged Congress to “take early remedial measures to bring future (Medicare) costs and finance into balance” and to “avoid the need for later, potentially precipitous changes.”

They said the shortfall could be covered by a 14% cut in benefits, a 16% increase in the Medicare tax or a combination of both.

In the early 1980s, the trustees had said Medicare’s trust fund would go bankrupt in the 1990s. But its financial position has improved, partly as a result of federal constraints on hospital payments.