Report: Medicare fund eight years from insolvency

Spurring new demands to overhaul the nation’s healthcare system, Medicare trustees announced Tuesday that the program’s biggest fund for serving the elderly would run out of money in just eight years.

But the announcement, the latest in a succession of dire predictions about Medicare’s fiscal condition, also pointed up the chasm separating Democrats and Republicans as the Obama administration and its congressional allies prepare for another major attempt to reshape the U.S. healthcare system.

GOP lawmakers seized on the announcement to attack Democratic proposals to create a new government health insurance program that people could choose if they are unhappy with their private insurance options. Such a public option is a centerpiece of President Obama’s healthcare agenda.

“The government-run healthcare programs we already have are unsustainable,” said Rep. Tom Price of Georgia, who heads the Republican Study Committee, a conservative House caucus. “It should be obvious that putting more people under the inflexible control of Washington is no way to bring down medical costs, and it’s certainly no way to provide healthcare of the highest quality.”


Administration officials and their allies on Capitol Hill, meanwhile, cast Medicare’s troubles as an opportunity to advance their own campaign.

“Medicare is central to the effort to promote high-quality, affordable healthcare for all Americans,” said Health and Human Services Secretary Kathleen Sebelius, a member of the Social Security and Medicare Board of Trustees.

Medicare provides health insurance to about 45 million people, most of them seniors. But the impending eligibility of baby boomers and the unrelenting rise in healthcare costs have heightened concerns about the program’s long-term viability.

The current economic downturn, which has eliminated millions of jobs and reduced workers’ payments into the system, has further eroded Medicare’s hospital trust fund.

The fund’s fiscal health is tied, in part, to the economy’s health. As recently as 2002, the trustees projected the fund could remain solvent until 2030; five years before that, they had warned of a collapse by 2001, precipitating a rescue by Congress.

Social Security and Medicare are financed primarily by taxes evenly divided between workers and employers that amount to 15.3% of wages.

The Social Security trust fund is not expected to run out of money until 2037, according to the trustees’ report.

Tuesday, outside groups pushing to overhaul the healthcare system joined senior administration officials in citing the latest Medicare assessment as evidence that comprehensive change is needed. AARP Executive Vice President John Rother called the report a “clarion call for healthcare reform.”