Report Says Medicare to Go Broke by 2019
By MARK SHERMAN and LEIGH STROPE, Associated Press Writers
WASHINGTON - Medicare will have to begin dipping into its trust fund this year to keep up with expenditures and will go broke by 2019 without changes in a program that is swelling because of rising health costs, trustees reported Tuesday.
Social Security (news - web sites)'s finances showed little change, and its projected insolvency date remained 2042.
The deteriorating financial picture for the health care program for older and disabled Americans is a result, in part, of the new Medicare prescription drug law that will swell costs by more than $500 billion over 10 years, according to the annual report by government trustees.
Provisions of the law that President Bush (news - web sites) signed into law in December "raise serious doubt about the sustainability of Medicare under current financing arrangements," the trustees said.
The 2019 go-broke date for the Medicare trust fund, which is devoted primarily to paying beneficiaries' hospital bills, is seven years sooner than what the trustees projected last year.
The trustees' report is the first official estimates of the long-term costs of the new Medicare law in December. As they did last year, the trustees said that projected lower tax receipts devoted to the program and higher expenditures for inpatient hospital care also contributed to the growing financial problem.
White House spokesman Trent Duffy said the rising cost of health care — and not the prescription drug program — is causing Medicare costs to swell. "It's health care costs — over 70 percent," he said. "Not prescription drugs."
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.
The report quickly became presidential campaign fodder.
In a conference call with reporters arranged by the campaign of presumptive Democratic nominee John Kerry (news - web sites), Democratic Sen. Dick Durbin of Illinois blamed the Bush administration and its Medicare prescription drug bill for Medicare's shortened solvency.
"The Clinton administration and Democrats believed save Medicare first," Durbin said. "The Bush approach is save the special interests first. ... This is not just about Medicare. It's about the credibility of the Bush administration."
The Bush-Cheney campaign, meanwhile, criticized Kerry who — like many Democrats — voted against the prescription drug benefit, complaining that it favored pharmaceutical companies and HMOs. Kerry, the campaign said, "would bankrupt Medicare while denying seniors access to cost- and lifesaving prescription drugs and preventative care."
The trustees took the unusual step of estimating the shortfall for both Medicare and Social Security on an "infinite horizon," instead of limiting their long-term projections to 75 years. The new approach, which would put the combined shortfall at $72 trillion, 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-authored last fall by Thomas Saving, a trustee who teaches economics at Texas A&M University.
Several analysts and Democratic congressional aides said the longer timeframe was meant to create a sense of crisis by Republicans who want to reduce the government's role in the programs in favor of private, individual investments.
Small differences in assumptions can produce major swings in projections, they said, pointing to the $139 billion difference over just 10 years in the estimated cost of the Medicare law between congressional budget analysts and Medicare's actuary.
The trustees' report is based on the estimates by Medicare actuary Richard Foster.
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.
A big reason for an earlier insolvency date "will be a direct result of increased payments to private health plans," said Terri Shaw, an analyst with the liberal Center for American Progress.
Last year, Medicare's insolvency date was moved up to 2026 from 2030. The projected insolvency date for Social Security, on the other hand, was extended to 2042, one year later than what was forecast in 2002.
The 2003 report also projected that Medicare will have to begin dipping into its trust fund in 2013 to keep up with expenditures.
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