- The Washington Times - Wednesday, March 24, 2004

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.”

White House spokesman Trent Duffy also said controlling the rising costs of health care can help as well — and he said one way to do that is to pass liability-reform legislation, which would limit the damages that can be collected in medical-malpractice suits.

“That’ll help Medicare, it’ll help Medicaid and it’ll help the government’s bottom line. And it’s stuck in the Senate,” he said.

Medicare’s solvency outlook had improved every year from 1997 until 2001, when it peaked, and remained unchanged in the 2002 report. In the last two years, though, the solvency period has fallen dramatically, from a 28-year future down to a 15-year lifetime.

Democrats blamed the Bush administration for the deteriorating picture, but they also fear that the White House will use the bleak outlook to try to control costs further by making Medicare compete with private-sector plans. That left them both praising and attacking the news.

Senate Minority Leader Tom Daschle, South Dakota Democrat, said Medicare “has lost 13 years of solvency since George Bush took office, in part because of this administration’s mismanagement of the economy and their deceptive prescription-drug bill.”

But he also said that “despite this setback, Medicare is still stronger today than it has been at many points in its history,” and he told the Bush administration that trying to “privatize Medicare is radical and wrong.”

Sen. John Kerry of Massachusetts, the Democratic presidential candidate, blamed “George Bush’s irresponsible tax breaks for the wealthy and his giveaway to the prescription-drug companies” for the declining prospects.

But Republicans said Democrats’ Medicare overhaul proposals last year would have cost far more than the program Congress passed, estimated variously at $395 billion and $540 billion, and would have left a deeper hole in the long-term financial picture.

At the end of last year, 47 million people were receiving Social Security benefits. That number included 33 million retired workers and their dependents, 7 million survivors of deceased workers, and 8 million disabled workers and dependents.

The program paid $471 billion in benefits in 2003 and took in $632 billion in income.

For Medicare, 41 million people received benefits under hospital insurance, supplementary medical insurance or both, including 35 million elderly and 6 million disabled beneficiaries, at an average total benefit of $6,966.

Combined, the two parts of Medicare took in $291.6 billion and paid out $280.8 billion.

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