Medicare will be broke

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Posted on Wed, Mar. 24, 2004

 

 

 

 

 

Medicare may be broke by 2019

 

This year, it will have to dip into its reserves

 

By Mark Sherman

 

THE ASSOCIATED PRESS

 

 

WASHINGTON - Medicare will have to begin dipping into its reserves this

year and without changes will go broke by 2019 - seven years earlier than

expected - because of rising health costs, trustees warned Tuesday.

 

The deteriorating financial picture for the program, which will start a

new seniors drug benefit in 2006, provided fuel for an already-hot political

debate in which both parties are courting graying baby boomers in this year's

elections for control of the White House and Congress.

 

Democrat John Kerry said the report showed President Bush had squandered

on tax cuts money that could rescue Medicare. The White House sought to blame

the program's problems on rising health costs, and not the drug benefit Bush

signed in December.

 

Medicare is the government's main health care program for older and

disabled Americans.

 

The trustees' annual projections said Social Security's finances remained

the same and the program's projected insolvency date remained 2042.

 

The new Medicare law will swell program costs by more than $500 billion

over 10 years and more than $8 trillion over 75 years, according to the report.

 

As they did last year, the trustees said that projected lower tax receipts

devoted to the program and higher expenditures for hospital care also

contributed to the growing financial problem.

 

The drain on the trust fund and projected costs for other aspects of

Medicare, including doctor visits and prescription drugs " raise serious doubt

about the sustainability of Medicare under current financing arrangements, " the

trustees said.

 

Without offering specifics, the trustees - four of six are senior

administration officials - said Congress would have to act soon to fix

Medicare's finances.

 

One trustee, Health and Human Services Secretary Tommy Thompson, however,

said preventive-care benefits in Medicare and coordinated care for chronic

illnesses that are part of the new law would help to contain costs.

 

The report quickly became presidential-campaign fodder.

 

Democrats said the lack of new jobs in the economy is responsible for

lower receipts from wage taxes. Kerry blamed " George Bush's irresponsible tax

breaks for the wealthy and his giveaway to the prescription drug companies " and

said the system would be broke by the time people 50 or younger reach

retirement.

 

" After inheriting a strong economy and record surpluses, this president

had the chance to stay the course of fiscal responsibility and shore up both the

Social Security and Medicare trust funds. Instead, he made a mockery of fiscal

responsibility, " Kerry said.

 

The Bush-Cheney campaign, meanwhile, criticized Kerry, who - like many

Democrats - voted against the prescription drug benefit. Kerry, the campaign

said, " would bankrupt Medicare while denying seniors access to cost- and

life-saving prescription drugs and preventive care. "

 

Republicans pressed for the overhaul of Medicare last year to give private

insurers a much larger role in the program as a way, Bush and others said, to

control long-term costs.

 

But the government's own projections are that private managed care plans

will cost taxpayers more than traditional Medicare for the foreseeable future.

 

Government officials have been predicting for years that the retirement

insurance and health care funds for the elderly - both financed through payroll

taxes - will be pushed toward insolvency as more post-World War II baby boomers

reach 65.

 

By 2078, the trustees said, the gap between revenues and spending would be

$31.4 trillion for the two programs. Looking even further into the future, the

trustees said the gap would be $72 trillion.

 

The latter estimate is on a so-called " infinite horizon " that some

analysts consider useful because it takes into account " not only people who are

participating today, but all future generations who will pay taxes and draw

benefits, " said a report co-written last fall by Thomas Saving, a trustee who

teaches economics at Texas A & M University.

 

Democratic lawmakers attacked its use as a way to make it appear that, in

particular, Social Security is in crisis. " This report shows the Social Security

system faces no imminent threat to its financial health, " Rep. Robert Matsui,

D-Calif., said.

 

Administration officials said the Social Security shortfall of $3.7

trillion over 75 years could be erased by increasing the combined Social

Security tax rate paid by employers and employees from 12.4 percent to 14.3

percent, or by cutting benefits by 13 percent. The administration is not

advocating either approach, instead calling for giving Americans the ability to

invest part of their Social Security contributions in personal accounts.

 

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