MONEY RUNNING OUT IN MEDICARE FUND

                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: WEDNESDAY, April 7, 1993                   TAG: 9304070222
SECTION: NATIONAL/INTERNATIONAL                    PAGE: A1   EDITION: METRO 
SOURCE: Knight-Ridder/Tribune
DATELINE: WASHINGTON                                LENGTH: Medium
MONEY RUNNING OUT IN MEDICARE FUND
The federal program that provides hospital insurance for 35 million elderly and disabled Americans will go broke within five to seven years unless costs are cut or taxes are increased, the government predicted Tuesday.
In its annual report, the federal Medicare program's five-member board of trustees estimated that its hospital insurance trust fund will run out of money as early as 1998 and no later than 2000.
Last year, the trustees predicted that the fund would go in the red no earlier than 2000 and might stay solvent until 2009.
The gloomier report, based on revised assumptions by government actuaries about costs and tax revenues, provides new ammunition for the Clinton administration on the need to revamp the nation's health-care system.
The report also said that while Medicare has very serious immediate financing problems, the separate Social Security retirement and disability funds are healthier and will remain solvent until 2036.
President Clinton can use the latest Medicare report to justify cost-saving measures, such as price controls on doctors and hospitals, that might be proposed to control both public and private health-care costs.
"These new estimates show a significant worsening in the economic health of the Medicare program," said Health and Human Services Secretary Donna Shalala, one of the trustees. "They reflect many of the problems that we see across the board in our health-care system today, and they are another demonstration of the need for systemwide change."
It is not clear whether Clinton will recommend that Medicare remain a separate program or be integrated into a national health-care plan that would provide basic health benefits for every American.
In their report, the trustees also warned that the trust fund that provides monthly income benefits for about 4 million disabled workers and their families will run out of money in 1995, two years earlier than previous predictions. The trustees recommended that the government shift some revenues from the Social Security retirement trust fund to cover the shortfall.
The estimate of Social Security's long-range solvency did not change significantly. The retirement program is expected to have enough revenues from payroll taxes to pay benefits for the next 23 years. After that, it will have to rely on interest income and tax increases or spending cuts.
Jon Cowan, co-founder of Lead ... or Leave, a group of people in their 20s pushing for major changes in federal programs for the elderly, said the report underscores the need for changes in entitlement programs beyond price controls.
"What this report should make clear is that there is only one way out of the entitlement mess, and that's to start taxing and taking away money from those who can afford it. Anyone who isn't poor is going to have to give up something," Cowan said.
For more than a decade, the federal government has tried to slow spending on Medicare hospital insurance, but its expenses nevertheless have more than tripled, from $26 billion in 1980 to an estimated $94 billion in 1993.
The hospital insurance, often called Medicare Part A, finances inpatient hospital care, skilled nursing facility services and some home health care.
It is financed primarily through payroll taxes; this year, for every $100 earned by a worker, the employee and employer each pay $1.45 in taxes to Medicare hospital insurance. Earnings above $135,000 are exempt from the tax.
The insolvency warning does not apply to Medicare Part B, which pays for physician and hospital outpatient services. It is financed by premiums paid by beneficiaries and from general government revenues. The government borrows money, which adds to the budget deficit, to keep Part B operating.
The board of trustees is composed of Shalala, Treasury Secretary Lloyd Bentsen, Labor Secretary Robert Reich and two private citizens, David M. Walker and Stanford G. Ross.

by Bhavesh Jinadra by CNB