Report: Medicare’s financial condition worsens

Sunday, March 23, 2003

March 24, 2003

WASHINGTON - Medicare's financial condition has "worsened significantly" over the last year, according to the annual report from the Medicare trustees, who moved the insolvency date for the program's hospital trust fund up four years from 2030 to 2026.

Unlike Medicare Part A, Part B remains "adequately financed into the future," but "only because its financing structure" requires general revenues and beneficiary premiums to be automatically adjusted, the report says. At the same time, however, Medicare Part B spending is experiencing "rapid growth" and is expected to double over the next decade, according to the report.

The new insolvency date for Medicare's Hospital Insurance Trust Fund, which covers Part A expenses, is because revenue from the Medicare payroll tax was 4% less than expected, and hospital expenses were 2% higher than expected because of increased inpatient admissions and the complexity of the admissions. Rising overall medical costs also resulted in the closer solvency date, the Los Angeles Times reported.

Together, Medicare Part A and Part B costs will more than triple in the next 75 years, growing from 2.6% of the gross domestic product today to 5.3% by 2035 and to 9.3% of GDP by 2077, the report states. Without changes to the program, benefits would have to be reduced by 42% or income from the Medicare payroll tax would have to be increased by 71% for the program to be solvent in 2077, according to the report.

The report gives President Bush "new ammunition" for his attempt to reform Medicare, the Journal reports. "The time has come to modernize and improve the Medicare program," HHS Secretary and Medicare Trustee Tommy Thompson said, the Wall Street Journal reported.