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Medicare’s Hospital Fund to Be in the Red by 2001 Without Changes

June 5, 1996

WASHINGTON (AP) _ Medicare’s hospital fund will be about $29 billion in the red by 2001 if the system isn’t changed, say congressional Republicans who want to overhaul the health insurance plan for the elderly.

The forecast was expected to be confirmed today with release of the Medicare trustees’ annual report. The trustees also were predicting that Social Security will go broke by 2029.

By 2002, the hospital fund will owe $86 billion more than it has, and by 2006, the shortfall could be more than $400 billion, Republicans using Congressional Budget Office estimates said Tuesday.

``We, as members of Congress, and most importantly President Clinton, as president, owes real leadership on this question,″ said Rep. Bill Thomas, R-Calif., chairman of the House subcommittee that oversees Medicare.

The trustees’ report was being issued by the six-member board, composed of the secretaries of treasury, health and human services and labor, the Social Security commissioner and two members of the public.

``For the president to miss this opportunity to step forward and lead is simply a repetition of the last year of playing politics with Medicare,″ Thomas said.

Clinton last year vetoed the balanced budget bill passed by Republicans, which would have saved about $226.7 billion from Medicare through 2002. About half the savings would have been in Medicare Part A, which is the fund in trouble.

Under the GOP plan, the program would be restructured to move more senior citizens away from fee-for-service plans into managed-care programs and set up medical savings accounts that would include a high-deductible catastrophic insurance plan.

Congressional Democrats, meanwhile, accused the Republicans of trying to unfairly strip senior citizens of the coverage they now enjoy under Medicare.

``Their goal has been to raid Medicare, not to save it, to lavish more tax breaks on the very people who don’t need them,″ said House Democratic Leader Dick Gephardt of Missouri.

Medicare Part A pays for care for senior citizens in hospitals, nursing facilities and hospices and at home. It receives money primarily from employers and employees, who each pay a 1.45 percent payroll tax.

Medicare’s hospital fund actually started spending more last year than it took in through the payroll tax, but it had a $134.3 billion surplus to dig into.

Social Security’s financial problems are not as worrisome yet because the system still is taking in more than it pays out. However, the trustees had predicted earlier that it would not go broke until 2030.

Congressional hearings have looked into Social Security, but the level of debate has not been nearly as high-pitched as with Medicare.

In this election year, solutions seem unlikely because of the deep philosophical differences in how to fix the 30-year-old program, which was signed into law by Democratic President Johnson and protected over the years by Congresses dominated by Democrats.

In their annual report last year, the trustees said Medicare wouldn’t be bankrupt until after 2002, but the date has moved closer because of increased medical costs for an ever-growing elderly population.

Spending will continue to exceed revenues, eating up the surplus and running growing deficits by 2001 unless the system is changed.

An even greater problem will exist in 2010 when the first of 76 million baby boomers turn 65. Democrats and Republicans agree that a commission should be appointed to plan for that day.

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