ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Monday, February 5, 1996 TAG: 9602050037
SECTION: NATIONAL/INTERNATIONAL PAGE: A-3 EDITION: METRO
DATELINE: WASHINGTON
SOURCE: The New York Times
THE FUND'S DEFICIT is significant because losses are expected to grow from year to year without tax increases or a cutback in the rate of growth in spending.
New government data show that Medicare's Hospital Insurance Trust Fund lost money last year for the first time since 1972, suggesting that the financial condition of the Medicare program was worse than assumed by either Congress or the Clinton administration.
In a report to Congress in April, the administration estimated that the amount in the trust fund would increase by $4.7 billion in the 1995 fiscal year, which ended Sept. 30. In fact, officials said in interviews, the balance in the trust fund fell by $35.7 million, to $129.5 billion.
``Things turned out a little worse than we expected,'' said Richard S. Foster, chief actuary of the Federal Health Care Financing Administration, which runs Medicare for 37 million people who are elderly or disabled. ``We had projected that 1997 would be the first fiscal year with a deficit.''
Income to the trust fund, primarily from payroll taxes, was slightly less than expected, Foster said, and outlays were somewhat higher. There were more hospital admissions than anticipated, patients were sicker and hospitals filed claims faster than expected, he said.
The deficit, while relatively small, is significant because once the trust fund starts to lose money, the losses are expected to grow from year to year. No tax increases are scheduled under current law, and federal officials do not expect a reduction in the rate of growth in Medicare spending unless there is a budget deal between President Clinton and Congress.
No such deal is in sight.
Moreover, neither party's proposals go far enough to guarantee the solvency of Medicare for the baby boom generation, whose members start to reach the age of 65 in 2011.
In general, health policy experts say, the changes needed to shore up Medicare can be relatively small and gradual if they are made soon, but they will have to be larger and more abrupt if they are deferred.
Bruce C. Vladeck, administrator of the Health Care Financing Administration, said: ``We are still analyzing the Medicare data to see what last year's experience might say about changing patterns of care or need among the elderly. In-patient hospital volume went up a bit more than we had projected. We are trying to figure out why.''
Officials at the American Hospital Association said the increase was puzzling because it followed more than a decade of decline in Medicare hospital admissions.
Donna Shalala, the secretary of health and human services, and three other administration officials serve as trustees of Medicare. In the report in April, they said the hospital trust fund would run out of money late in the year 2002.
Republicans seized on that prediction to justify their proposals for vast changes in the structure of Medicare. They said they were cutting the growth of Medicare not to balance the budget, but to ``preserve, protect and strengthen'' the program. Clinton vetoed the proposals, saying they would hurt beneficiaries and ``dismantle Medicare as we know it.''
In view of the financial shortfall in 1995, the Hospital Insurance Trust Fund could go bankrupt earlier than anticipated, perhaps a year sooner, but that is not certain.
``It's hard to say what the implications are for future estimates,'' Foster said. ``It's possible this could advance the depletion date, or the trust fund might be depleted earlier in the same year, 2002. In any event, it doesn't help. That's a safe conclusion.''
The trustees and the actuary will make new forecasts in their next annual report, which under federal law is to be submitted to Congress by April 1. The report may be a month late because of time lost while the government was shut down in November and again in December.
LENGTH: Medium: 75 linesby CNB