Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, April 19, 1990 TAG: 9004190775
SECTION: NATIONAL/INTERNATIONAL PAGE: A/1 EDITION: EVENING
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
In its annual report to Congress, the board said "early corrective action is essential in order to avoid the need for later, potentially precipitous changes."
The hospital insurance trust fund is financed with payroll taxes. While currently more than four covered workers support each beneficiary, that ratio will start slipping early in the next century. By the middle of the next century there will be just two covered workers supporting each beneficiary.
"Not only are the anticipated reserves and financing of the hospital insurance program inadequate to offset this demographic change, the trust fund is projected to become exhausted even before the major demographic shift begins to occur," said the report, released Wednesday.
If economic growth is moderate, the Medicare Hospital Insurance Trust Fund will run out of money between 2003 and 2005, the board said.
Under optimistic economic assumptions, funds would be exhausted in 2018, but under a pessimistic scenario, the fund could run dry in 1999, the board said.
"These findings underline the urgency of our task in containing health care costs and spending our health care dollars more effectively and efficiently," Health and Human Services Secretary Louis Sullivan said.
The projected bankruptcy date is a staple of the board's annual reports. In the early 1980s, it predicted bankruptcy in the 1990s, but the date slipped back as cuts were made in the Medicare program and more optimistic forecasts were used later in the decade.
Medicare's other trust fund, the Supplemental Medical Insurance Trust Fund, is "actuarially sound" - that is, it should have enough money to meet its obligations, the board said. But the trustees said they were concerned about the soaring costs of the program, which pays Medicare Part B expenses - physician and outpatient services.
"Growth rates have been so rapid that outlays have nearly doubled in the last five years," the board said.
About 75 percent of the money in the Supplemental Medical Insurance Trust Fund comes from general federal revenues and 25 percent comes from premiums paid by beneficiaries.
The Medicare program provides medical benefits to about 30 million Americans age 65 and older and 3 million disabled individuals.
The board also reported that the Social Security trust funds that support benefits for the elderly, survivors and the disabled will remain financially sound well into the next century.
Trustees estimated the next cost-of-living benefit increase for Social Security recipients would be 4.5 percent. This would be considered the 1990 increase, though it would not be paid until beginning in January 1991. The last increase, for 1989, was 4.7 percent, reflected in checks last January.
The Old Age and Survivors Insurance and Disability Insurance trust funds will take in more money than they pay out for the next several decades.
Those two trust funds are taking in $316 billion and paying out $254 billion in the current fiscal year. The hospital fund will take in about $80.3 billion and pay $63.8 billion; the supplemental fund will take in $46.2 billion and pay $44.4 billion.
by CNB