U.S. Says Medicare Hospital Fund Nearing Bankruptcy

Medicare’s hospital trust fund is only four years away from bankruptcy, the government reported Thursday, prompting the Clinton administration to insist that any budget deal this year must include a financial rescue of the massive medical program for the elderly and disabled.

The hospital trust fund will run out of money in the latter part of 2001, according to the annual report issued by the system’s trustees. Social Security is in much better shape, the report says, because the retirement trust fund will not face a deficit until the year 2029.

While the projected doomsday dates for the programs are no earlier than in last year’s trustees’ report, the political and fiscal pressure is more intense because another year has elapsed without significant reforms to deal with rising costs in either program.

President Clinton will not accept a budget agreement with the Republican Congress unless it provides Medicare savings that extend the hospital trust fund’s life another seven years, until 2008, Health and Human Services Secretary Donna Shalala said Thursday.

“We must do it, we cannot wait any longer,” she told a news conference. “Both parties have to commit themselves to a solution.”

However, cooperation may be difficult. Sen. William V. Roth Jr. (R-Del.) and several other Senate Republicans pointedly recalled being “ravaged,” in the words of Sen. Paul Coverdell (R-Ga.), by the Democrats in the 1996 campaign for having proposed reductions in the growth of Medicare while seeking a broad tax cut.

But Roth, chairman of the Finance Committee, said, “It’s in everybody’s interest to work together.”

Among the Medicare reforms Republicans are seeking, according to Sen. Don Nickles (R-Okla.), is an expansion of health care choices for seniors. It would be modeled after the popular Federal Employees Health Benefit Program, which covers about 10 million government workers, retirees and their dependents.

Democrats are balking at Republican budget-package proposals. Sen. John D. (Jay) Rockefeller IV (D-W.Va.) said the GOP’s stated desire to cut capital gains and estate taxes poses “the real danger here” and stands in the way of a Medicare solution.

As the majority party in both houses of Congress, the Republicans have the upper hand in negotiations for changes in Medicare. “We’re absolutely committed” to solving the Medicare problem “even if there’s no budget resolution,” said Sen. Phil Gramm (R-Texas).

Shalala said that if an agreement is reached this year on immediate fiscal repairs to Medicare, a bipartisan commission could be appointed to look for permanent financial solutions.

Any action this year or next will be just a short-term solution, giving future Congresses and presidents the burden of preserving the popular programs for the massive baby boom generation, which begins drawing benefits in the year 2011. Spending will soar--while there are 34 million persons over 65 today, there will be 61 million by the year 2025.

“We have a solid proposal, we cannot wait any longer,” Shalala said, referring to the administration’s budget proposal to trim future Medicare outlays by $100 billion over five years. The money would come largely from a slowdown in Medicare payments to hospitals, health maintenance organizations and doctors.

In private talks with congressional leaders, the administration has offered another $15 billion in future savings, which also would come from payments to providers rather than from beneficiaries.

In the House, Rep. Bill Archer (R-Texas), chairman of the Ways and Means Committee, said Thursday’s report was a “call to action that the Congress and the president should heed--and heed immediately,” adding: “The longer we wait, the worse it gets.”

Rep. Bill Thomas (R-Bakersfield), chairman of the Ways and Means health subcommittee, also called for urgent action, warning that “four years is not very much of a margin.”

Medicare will spend an estimated $208 billion this year on more than 38 million beneficiaries, helping to pay the medical bills of persons 65 and over and of the disabled of all ages. The hospital trust fund is financed by a 1.45% payroll tax on all wages, paid by both the worker and the employer.

Part B of Medicare, which covers doctor bills, gets about 75% of its financing from general tax revenue. The rest comes from payments by beneficiaries through an insurance premium of $43.80 a month. Social Security benefits, totaling about $354 billion this year, are paid to 44 million persons: retirees and their spouses and survivors, and disabled persons, their spouses and children.

The money comes from payroll taxes on 144 million workers, who pay 6.2% on their first $65,400 in annual wages. Employers pay an equal amount for each worker.

The annual report on Medicare and Social Security is prepared by a six-member board of trustees: Shalala, Treasury Secretary Robert E. Rubin, acting Labor Secretary Cynthia A. Metzler, acting Social Security Commissioner John J. Callahan and two public trustees, Marilyn Moon and Stephen G. Kellison.

Thursday’s health care discussion in Washington was not limited to the needs of senior citizens.

A bipartisan drive to extend health coverage to people under age 18 got a major boost when six Republican senators and 10 Democratic senators together unveiled a plan to expand Medicaid, the health program for the poor. The proposal aims to cover as many as half the 10 million children who have no medical insurance by giving states financial incentives.