ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Thursday, June 6, 1996 TAG: 9606060082
SECTION: NATIONAL/INTERNATIONAL PAGE: A-1 EDITION: METRO
DATELINE: WASHINGTON
SOURCE: FROM KNIGHT-RIDDER/TRIBUNE AND THE NEW YORK TIMES
Medicare is in critical condition and needs urgent political attention so elderly beneficiaries won't have to worry about paying for their health care, the program's trustees said Wednesday.
Social Security also has problems, they said, that are more like a slow-growing malignancy: a lot cheaper to treat in the short run than later on.
Both programs - the underpinnings of middle-class retirement - will crumble under the burden of the baby boomers without major changes, according to the trustees' annual report.
The six trustees - who include three Clinton cabinet members - said that unless Congress and the president cut Medicare costs, the fund that pays hospital bills for the $180 billion-a-year program faces bankruptcy by 2001. This year's report moved the insolvency dates up one year from 1995's projection.
But the president's supporters would not concede that the program must undergo basic changes. Asked whether retirees might be facing fewer services or higher costs under Medicare, Donna Shalala, the secretary of health and human services, replied, ``Absolutely not.''
If Medicare slides into the red, the government would have to delay or stop paying hospital, home health, hospice, and convalescent nursing home bills for beneficiaries. Doctor visits and outpatient care are paid from a separate trust fund, which is not now in jeopardy.
The trustees called for a short-term fix to stabilize Medicare and the appointment of a bipartisan commission to recommend long-term solutions. Such a panel was formed once for Social Security, ultimately prompting Congress in 1983 to raise payroll taxes and make other changes. Few expect agreement on a plan for Medicare this election year, however.
Social Security's problems won't become critical until 2012, the year in which benefits are projected to outstrip tax collections.
On paper, Social Security is building a surplus to handle the baby boomers' retirement, and the program is solvent until 2029. But years of government deficits have sabotaged that strategy. When tax collections no longer suffice, the money to pay benefits will have to come from elsewhere in the budget, or from higher taxes and more borrowing.
Social Security is now the biggest federal program, and Medicare is the third-largest, after defense. The budget cannot be balanced or stay balanced without addressing them.
``We have both a short-term problem that's serious, and an extremely serious long-term problem,'' said Sen. Bob Kerrey, D-Neb. ``Regardless of who wins the elections this fall, we will see in 1997 that we need to do things like raising the eligibility age for these programs and charging higher deductibles and copayments for Medicare.''
With the graying of America, fewer tax-paying workers are supporting more retirees entitled to benefits. Demands on Medicare and Social Security will escalate when baby boomers begin retiring in 2010, but the financing base for the programs will be shrinking.
Competing proposals for a short-term fix by the White House and Republicans are similar in their basics. Both would cut payments to doctors and hospitals and open the way for cost-conscious managed-care plans to sign up more retirees. In a concession to Clinton, Republicans have scrapped their proposal to raise beneficiary premiums, though many independent experts believe it would be a prudent step.
Republicans would slow Medicare's projected spending by about 11 percent over six years, while Clinton would slow the spending about 8 percent.
``The differences between the Democrats and the Republicans are not that great,'' said Stuart Altman, an economist at Brandeis University who specializes in health policy. ``I'm sure they will be dealt with quite quickly next year no matter who is elected.''
The real problem in the view of Altman and many others - one few politicians in either party are addressing - will arise in about 2010.
``Right now nothing's going to happen,'' said economist Gail Wilensky, who ran Medicare in the Bush administration. ``We'll just get ourselves slightly deeper in the hole. People don't understand how worried they should be. Even if we buy ourselves four or five more years for Medicare, we haven't dealt with the baby boomer problem.''
On Wednesday, Clinton invited Republicans to make a Medicare deal on items about which the two sides agree already, buying time to seek a permanent fix.
House Speaker Newt Gingrich, R-Ga., said the GOP is willing to work with Clinton. But many Republicans feel Clinton unfairly tarred them in last year's budget debate. ``Medicare is going broke, and the cost of last year's veto is profound,'' declared Rep. Bill Archer of Texas.
Republicans and Democrats have said they're not yet ready to deal with Social Security's long-term shortfall. This summer, a independent advisory panel will recommend cutting benefits and investing Social Security funds in the stock market to earn more money for the program. Panel members are split over a plan to allow individuals to manage their own retirement funds.
LENGTH: Medium: 99 lines ILLUSTRATION: GRAPHIC: Medicare in trouble. color. (chart)<by CNB