Medicare Trustees Release New Long-Term Financial Estimates, Predict Part A Solvency Until 2030
Long-term financial estimates for Medicare have improved slightly in the past year, despite the recession that began last March, according to a new report released yesterday by the six trustees of the programs. The New York Times reports that the trustees -- who are mostly appointees of President Bush -- cited an increase in the "anticipated growth in the productivity" of U.S. workers in the next decade and in the next 75 years as the "main reason for the improvement." According to the report, if current federal law remains the same, Medicare Part A would become insolvent in 2030, one year later than trustees predicted in 2001 (Pear, New York Times, 3/27). Medicare Part A, the Federal Hospital Insurance Trust Fund, funds hospital, home health, skilled nursing facility and hospice care for Medicare beneficiaries (HHS release, 3/26). The report found that Medicare Part A spent $143.4 billion last year, an increase of 9.4% from 2000, but received $174.6 billion for a total increase of more than $31 billion (New York Times, 3/26). However, the report predicted that Medicare Part A would begin to run a deficit in 2016, the same time that trustees predicted last year (McKinnon/Christie, Wall Street Journal, 3/27). The report also found that Medicare Part B spent $101.4 billion last year, an increase of 12% from 2000 (New York Times, 3/27). Medicare Part B, the Supplementary Medical Insurance Trust Fund, funds physician services, outpatient care and other medical services (HHS release, 3/27). The report predicted smaller increases in Medicare Part B spending in the next few years -- an average of less than 5% per year from 2001 to 2004 -- in part as a result of a 5.4% reduction in reimbursements for physicians that took effect on Jan. 1. The report predicted that Medicare costs in general will "grow much faster than the economy" in the future, possibly requiring beneficiaries to pay larger premiums and copayments.
The six trustees -- Treasury Secretary Paul O'Neill, HHS Secretary Tommy Thompson, Labor Secretary Elaine Chao, Social Security Commissioner Jo Anne Barnhart and two university economists who represent the public -- recommended that Congress "shore up" Medicare before the 76 million baby boomers reach retirement age between 2011 and 2029 (New York Times, 3/27). Thompson said, "Medicare's benefits are simply not secure for nearly 80 million Americans who will be depending on its benefits by the year 2030" (HHS release, 3/26). "We cannot be so irresponsible we leave this problem for the next generation," Thompson added (Carter, AP/Philadelphia Inquirer, 3/27). Thompson said that lawmakers should address Medicare reforms this year to "allow potentially painful changes to be made more gradually" (Alonso-Zaldivar, Los Angeles Times, 3/27). President Bush has proposed "fundamental changes" for Medicare, such as a plan to offer private health plans a larger role in Medicare to help control costs. However, lawmakers "do not claim any popular mandate for changes that would slow the growth" of the program (New York Times, 3/27).
The Wall Street Journal reports that the new estimates are not likely to "quell" the debate over Medicare, a "hot political topic." Thompson said the report should not slow "momentum for change," particularly among lawmakers working to add a prescription drug benefit. "I don't think they're going to want to go back home and campaign without delivering," he said, adding, "This may be the most propitious time for acting" (Wall Street Journal, 3/27). Thompson said that he hoped that Congress would pass a Medicare prescription drug benefit this year. Many lawmakers from both parties campaigned on the issue in 2000. Bush has proposed to spend $190 billion over 10 years on a Medicare prescription drug benefit, and House Republicans have proposed a 10-year, $350 billion plan. Senate Democrats have proposed to spend $500 billion over 10 years (Hosler, Baltimore Sun, 3/27). NPR's "Morning Edition" also reported today on Medicare solvency. The full segment will be available online after noon ET. Note: You must have RealPlayer Audio to listen to the segment (Silberner, "Morning Edition," NPR, 3/27).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.