Medicare Betters Spending Forecast by $3.2 Billion

The financially beleaguered Medicare program got some unexpected good news Monday as the Treasury Department reported that total spending for the fiscal year fell $3.2 billion below previous forecasts.

Outlays for doctor bills and hospital outpatient services were less than expected, the Treasury said as it issued final figures for the 1996 fiscal year, which ended Sept. 30.

Medicare outlays were $196.6 billion for the year, a 9.2% increase from the $180.1 billion spent the year before but lower than the mid-session forecast of $199.8 billion in July.

Administration officials welcomed the news but were not sure whether the lower-than-expected spending was a fluke or represented a significant slowdown in inflation for the cost of caring for the 37 million Medicare beneficiaries.

“It will take awhile to crunch the numbers and figure it out,” said Victor Zonana, a spokesman for the Department of Health and Human Services. “It appears to be good news but you can’t do a long-term trend analysis yet.”

The program, which serves those over 65 and the disabled of all ages, is the government’s fourth-largest spending item, ranking behind only Social Security, interest on the national debt and defense.

The $196.6 billion included $127.7 billion for outlays by the hospital trust fund, Part A of Medicare, which faces the most serious financial problems and is expected to run out of money in 2001. The trust fund is a special pot of money financed by a payroll tax of 1.45% on workers and an identical tax on their employers.

The balance in the Part A fund fell by $4 billion during the fiscal year ended Sept. 30, its biggest decline ever.

One of the central issues for Congress next year will be a short-term rescue of the hospital fund. Medicare’s independent board of trustees estimates that the trust fund will lose another $13 billion this fiscal year.

HHS Secretary Donna Shalala has called for cooperation from congressional Republicans to agree on $100 billion in savings from payments to doctors and hospitals. However, the Congressional Budget Office has estimated that it would take more than $200 billion to extend the life of the trust fund just three additional years, to 2004.

And the Republicans are reluctant to cooperate because their candidates are being battered with Democratic commercials accusing them of seeking to cut Medicare outlays.

“The only solution to the Medicare crisis is a bipartisan one, and that’s why our nation will live to regret the fearful and misleading campaign the Democrats have waged over Medicare this fall,” said Rep. Bill Archer (R-Texas), chairman of the House Ways and Means Committee, which handles Medicare legislation.

During the budget season this year, Republicans in Congress proposed $168 billion in savings by holding down the rate of growth of Medicare spending, while the president called for $124 billion in savings.

Neither party wants to raise Medicare taxes or shift any substantial new part of the burden to Medicare beneficiaries, a vocal and powerful voting bloc.