Fwd: A Dire Report on Medicare Finances; New Bill Helps Lurch Towards Bankruptcy

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Fri, 30 Apr 2004 09:22:05 -0400

A Dire Report on Medicare Finances; New Bill Helps

Lurch Towards Bankruptcy

 

 

A Dire Report on Medicare Finances

Under New Law, Hospital Fund May Run Out by 2019

 

By Amy Goldstein

Washington Post Staff Writer

Wednesday, March 24, 2004; Page A01

 

The Medicare system's financial condition has deteriorated sharply during the

past year, according to a government forecast that says the program has been

weakened by the new Medicare law that Republicans had said would solidify its

future.

 

The report, issued yesterday by the trustees who monitor the fiscal health of

Medicare and Social Security, concluded that the fund that pays hospital bills

in the health insurance program will run out of money by 2019, seven years

sooner than they predicted a year ago. The report said that the new law is a

significant factor, because it will steer more money to private health plans and

increase payments for health care in rural areas.

 

Medicare's finances have " taken a major turn for the worse, " the trustees warned

in their annual report. Since its creation in the 1960s, the program has never

before lurched seven years closer to insolvency in one year. And, the report

said, Congress's efforts to reduce physician costs in the late 1990s are no

longer working, suggesting that Medicare patients probably will be required to

pay higher Medicare insurance premiums in the near future.

 

Yesterday's assessment is the most recent reminder of the enormous financial

pressures that confront Medicare -- which covers 40 million elderly and disabled

Americans -- as health costs rise, longevity increases and the baby boom

generation is poised to start reaching retirement age in seven years.

 

This year's prediction, however, carries uncommon political and budgetary

implications. It arrives as the political parties are feuding over the new

Medicare law, which President Bush pushed through Congress four months ago, and

as fiscal conservatives have become preoccupied with whether the government is

spending more than it can afford.

 

Bush set forth his goals for changing Medicare six months after taking office,

and he has said that any legislation must " strengthen the program's long-term

financial security. " Yesterday's report was the most concrete evidence to date

that the law that barely passed both chambers of Congress did not make the

program any less financially fragile.

 

The report said changes to the law account for two years out of the seven-year

acceleration of the program's insolvency.

 

The best-known part of the program, the addition of prescription drug benefits

in two years, does not figure in the program's accelerated insolvency because it

will be paid out of general revenue, not the hospital trust fund that is the

main focus of the trustees' report. Instead, the report indicated, the trust

fund will be harmed by other provisions of the law: tilting Medicare more

heavily toward the private sector and propping up the finances of doctors and

hospitals in rural America.

 

Health and Human Services Secretary Tommy G. Thompson acknowledged: " Of course,

progress always comes at a price. " Still, Thompson strongly praised the law,

saying that it will enable more older Americans to afford medicine and will

" protect the quality and the solvency of the Medicare system now and in the

future. "

 

Thompson, one of four Cabinet secretaries who are trustees, said that the panel

had not taken into account aspects of the law that he said ultimately will save

money. He said they include physicals for new Medicare patients that might

detect ailments early when they are relatively easy to treat and " disease

management programs " for people with chronic illnesses.

 

But John L. Palmer, one of two members of the public who are trustees, said the

potential savings Thompson cited are " more nebulous, long-term hopes than things

that can be quantified. " Palmer, a Syracuse University economist, said: " The

facts are, the new legislation has increased costs " in hospital and outpatient

services, along with the new drug benefit, " without any comparable increase in

revenues. It obviously made the situation somewhat worse. "

 

The report said that over the next 75 years, the time frame the trustees

traditionally consider, Medicare will have an unfunded liability of $27.7

trillion, $8.1 trillion of that from the new drug benefit. Last year's report

predicted a $15.5 trillion liability without the new benefit. Long-term

predictions are difficult, and the program's financial future will hinge, in

part, on how quickly health costs rise and whether the overall economy is

strong.

 

The report also said Medicare's hospital finances are not adequate in the

short-term, with the trust fund no longer running a surplus as of this year. And

it said the part of the program that pays for doctor's visits unexpectedly ran a

$10.3 billion deficit last year and is likely to have one of $1.7 billion this

year, despite congressional efforts in the late 1990s to prevent such

shortfalls.

 

Administration officials and congressional Democrats called for quick efforts to

shore up Medicare's finances, although they disagree over how to do so, saying

that fixing the program relatively soon would be less painful than waiting. If

Medicare runs short of money, the government would have to reduce benefits or

the number of people in the program, charge patients more, or devote additional

federal money to fill in the gap.

 

The main GOP authors of the Medicare law swiftly defended it yesterday. House

Ways and Means Committee Chairman Bill Thomas (Calif.) said the trustees' report

" validates the reasons Republicans had in reforming Medicare and enacting a

prescription drug benefit last year. The overall future health of Medicare

depends on these reforms and our future action. " He noted that a provision of

the law, favored by conservatives, requires the president to suggest to Congress

limits on Medicare spending if general revenue ever exceeds 45 percent of the

program's expenditures. The report predicted that point will be reached in 2012.

 

Democrats, however, used the assessment as new ammunition against the law and

the administration. Sen. John F. Kerry (Mass.), the presumptive Democratic

presidential nominee, said in a statement: " For years, we have been warning that

Medicare won't be there for our children's generation. Today, the Medicare

trustees have reported that because of George Bush's irresponsible tax breaks

for the wealthy and his giveaway to the prescription drug companies, Medicare

might not even be there for our generation. "

 

Yesterday's report found little change regarding Social Security, the other

cornerstone of the government's assistance to older Americans. The trustees

concluded that the trust fund that pays Social Security's retirement benefits

will become depleted in 2042, the same date they had predicted a year ago.

 

Still, Treasury Secretary John W. Snow reiterated the administration's assertion

that the Social Security system is unsustainable, and that workers should be

allowed to divert some of their payroll taxes into private retirement accounts.

http://www.washingtonpost.com/ac2/wp-dyn/A17672-2004Mar23?language=printer

 

 

 

 

 

 

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