Medicare to go broke by 2019, trustees say

Medicare’s trust fund will become insolvent in 2019, seven years sooner than predicted last year, according to a new report by Medicare trustees that partly blames the prescription-drug bill President Bush signed into law last year.

The annual report said that Medicare, which provides health insurance to the elderly, will also have to dip into its trust fund this year to cover insurance costs for hospital care, the program’s biggest expense.

“The trust fund is seriously out of financial balance in the long range, and substantial reform will be required,” the six trustees said in their report, released yesterday.

The trustees released their annual assessments of the short-term and long-term financial health of both Medicare and Social Security.

Social Security’s outlook was little changed in this year’s report. The payroll taxes coming into the program will be insufficient to cover payouts beginning in 2018, the same prediction made in last year’s report.

But in the first report since passage of last year’s Medicare overhaul, including the new “Part D” prescription-drug benefit, that program’s trustees painted a gloomy picture.

“When the Part D program becomes fully implemented in 2006, general revenue transfers are expected to constitute the largest single source of income to the Medicare program as a whole — and would add significantly to the federal budget pressures,” the trustees said.

Of the seven-year decrease in Medicare’s projected solvency, two years are attributable directly to the Medicare overhaul. Another two years are blamed on lower revenues and higher health care costs. The rest of the changes are attributed to a mixture of new assumptions and a finding that patients are generally less healthy than models predicted.

Tommy G. Thompson, secretary of Health and Human Services, called the Medicare numbers “not as good as we had hoped,” but said that providing a modern health-care program is expensive.

“Progress always comes at a price,” said Mr. Thompson, one of the six trustees. He and three other trustees are Bush administration officials, and two are outside analysts.

He also predicted the long-term picture will improve, thanks to reforms in the new law that haven’t kicked in yet.

He said new preventative-care and disease-management programs, charging high-income seniors more for some premiums, and long-term provisions that could force Medicare to compete against private insurance plans have the ability to save billions in the long term.

“All of these things, you know, are too early,” he said. “It’s premature to really state that induction physicals into Medicare, disease management, how much is that going to save? But if you are really realistic and use common sense, you have to come to the conclusion, like I do, that managing diseases is going to save us many dollars in the future and it’s able to improve the quality of health for our seniors.”

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