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Medicare Seen Insolvent by 2019

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  • Medicare Seen Insolvent by 2019

    By Jonathan Nicholson

    WASHINGTON (Reuters) - The fund that pays hospital benefits to the U.S. elderly is expected to become insolvent in 2019, seven years earlier than predicted, a report on the Medicare system said on Tuesday.



    The report from the Medicare and Social Security (news - web sites) programs' trustees -- an assessment that may move Medicare closer to the front-burner in an accelerating presidential election campaign -- said Medicare's prognosis dimmed sharply over the last year and that spending will exceed income by about $7.5 billion in 2004.


    "The financial outlook for the Medicare Hospital Insurance (HI) Trust Fund that pays hospital benefits has deteriorated significantly from last year, with annual cash flow deficits beginning this year and expected to grow rapidly after 2010 as baby boomers begin to retire," the trustees said in their annual look at the financial health of the programs.


    The report said Medicare will have to use the fund's interest earnings on special Treasury securities to make ends meet in 2004, well before the 2013 date projected in last year's report. That will place pressure on the government's general revenues at a time when it is already facing record budget deficits.


    The Social Security trust fund is expected to be exhausted in 2042, the same as predicted in last year's report. Medicare and Social Security are financed by dedicated payroll taxes that go to trust funds used to pay expenses for the programs.


    The report blamed Medicare's fiscal woes on lower payroll tax receipts and higher spending on in-patient hospital care.


    The campaign of Democratic presidential candidate John Kerry (news - web sites) wasted little time in blaming President Bush (news - web sites) for Medicare's problems.


    "In just one year, George Bush's reckless policies have sped Medicare seven years closer to bankruptcy," Kerry said in a statement.


    The new projections may also renew debate over legislation enacted in 2003 that provides for a prescription drug benefit and increases payments to rural hospitals and private health plans.


    The prescription drug plan came under fire after estimates suggested it would cost some $130 billion more than assumed in last year's congressional deliberations.


    Senate Democratic leader Tom Daschle, of South Dakota, repeated his call for another vote. "I think as the result of the fraudulent way Congress was called upon to act on this legislation, and given the extraordinary consequences this legislation has, not for the next year or so but for the next couple of generations, there ought to be a revote in the Congress," he said.


    But Treasury Secretary John Snow, one of the seven public trustees, said the reports showed the need for reform and again touted the idea of individual Social Security accounts.


    "Inaction is not a responsible course," he said.


    Snow also said the negative cash flow situation was not unprecedented. The last time the fund saw a negative cash flow was in 1999, Bush administration officials said.


    Snow also said the change in the hospital program's status was "not caused in any way by the creation of the Medicare prescription drug program." However, at a press briefing, another trustee, Health and Human Services (news - web sites) Secretary Tommy Thompson, said the higher reimbursements in the drug bill advanced the trust fund's exhaustion date by about two years.


    The prescription benefit is largely to be paid for by general revenues, not the payroll tax.


    Reaction from the AARP, a lobby for the elderly, was muted. "Social Security's fiscal challenges can be met with modest adjustments that maintain the program's lifetime, inflation-protected guaranteed benefits," the group's board said in a statement.


    This really stinks! We're forced to give a percentage of our wages to a program that's expected to be bankrupt by the year 2019! What are we paying into this for?!!
    \"No, I think Space is a dimension of Time. My theory is that Time is a field and that Space exists as an aspect of Time.\" Michael Moorcock

    \"All I know about anything is \"I wasn\'t. I am. I will not be.\" Michael Moorcock
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