Report cites vulnerability of Medicare finances

April 07, 1993|By Charles Green | Charles Green,Knight-Ridder News Service

WASHINGTON -- The federal program that provides hospital insurance for 35 million elderly and disabled Americans will go broke within five to seven years unless costs are cut or taxes are increased, the government predicted yesterday.

In its annual report, the Medicare program's five-member board of trustees estimated that its hospital insurance trust fund will run out of money as early as 1998 and no later than 2000.

Last year, the trustees predicted that the fund would go in the red no earlier than 2000 and might stay solvent until 2009.

The gloomier report, based on revised assumptions by government actuaries about costs and tax revenues, provides new ammunition for the Clinton administration on the need to revamp the nation's health care system.

President Clinton can use the latest Medicare report to justify cost-saving measures, such as price controls on doctors and hospitals, that might be proposed to control both public and private health care costs.

"These new estimates show a significant worsening in the economic health of the Medicare program," said Health and Human Services Secretary Donna E. Shalala, one of the trustees. "They reflect many of the problems that we see across the board in our health-care system today, and they are another demonstration of the need for systemwide change."

It is not yet clear whether Mr. Clinton will recommend that Medicare remain a separate program or be integrated into a national health care plan that would provide basic health benefits for every American.

In their report, the trustees also warned that the trust fund that provides monthly income benefits for about 4 million disabled workers and their families will run out of money in 1995, two years earlier than previously predicted. The trustees recommended that the government shift some revenues from the Social Security retirement trust fund to cover the shortfall.

The estimate of Social Security's long-range solvency did not change significantly. The retirement program is expected to have enough revenues from payroll taxes to pay benefits for the next 23 years. After that, it will have to rely on interest income and tax increases or spending cuts.

Jon Cowan, co-founder of Lead . . . or Leave, a group of people in their 20s pushing for major changes in federal programs for the elderly, said the report underscores the need for changes in entitlement programs beyond price controls.

"What this report should make clear is that there is only one way out of the entitlement mess, and that's to start taxing and taking away money from those who can afford it. Anyone who isn't poor is going to have to give up something," Mr. Cowan said.

For more than a decade, the federal government has tried to slow spending on Medicare hospital insurance, but its expenses nevertheless have more than tripled, from $26 billion in 1980 to an estimated $94 billion in 1993.

The hospital insurance, often called Medicare Part A, finances inpatient hospital care, skilled nursing facility services and some home health care.

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