Medicare Money Problems Trigger Warning

The Medicare health program's annual financial report reveals a system that is healthy at the moment, but has a bleak long-term prognosis.

The report, released Monday, is sure to touch off a political firestorm due to recent actions that compel the federal government to address the problem.

At the moment the trust fund that pays for hospital and nursing home care has enough money to last until the year 2019. That's a year longer than last year's projection.

Still, Health and Human Services Secretary Michael Leavitt sees a problem.

"This year's spending has triggered ... for the very first time, a Medicare funding warning," Leavitt said.

That "warning" is part of a mechanism created in 2003 by congressional Republicans. They wanted a way to keep closer tabs on the portion of Medicare that's funded by general taxes and Medicare premiums. Known as "Part B," it covers doctor visits and other outpatient care. (Other funding for Medicare comes from payroll taxes.)

The warning is triggered when, for two years in a row, Part B — and other Medicare funding from general revenues — are expected to exceed 45 percent of total Medicare spending within seven years. This year is the second year that has happened.

Leavitt noted that the first action triggered by the warning comes from the White House.

"The warning requires that the president propose solutions to curb spending when he submits his 2009 budget," he said.

That is due to happen next February. Then Congress is supposed to act on those recommendations by no later than next June.

But the idea of major cuts to Medicare in what will by then be the middle of a presidential campaign seems highly unlikely to people like Bruce Vladeck, who steered the Medicare and Medicaid programs during the Clinton administration.

He says the budget problem isn't really Medicare but health care costs in general, making it impossible for Medicare costs to slow down on their own.

"It's not really possible to get Medicare costs to grow at a substantially lower rate than that of health care costs in general and still provide the kind of access to healthcare that Medicare ... [patients] have been promised," said Vladeck, who now runs the University of Medicine and Dentistry of New Jersey.

Another reason Congress isn't likely to act on the funding warning is because it's not much of a priority, critics say.

Robert Greenstein, who heads the liberal Center on Budget and Policy Priorities, says Congress can't even bring itself to act on more minor funding recommendations made by its own Medicare experts.

"Any member of Congress that makes a statement this week about the trustees report ought to be tracked all year," he said, to see whether they've voted on recommendations that save money and help Medicare's finances.

One such recommendation is that Congress cut funding for private health care maintenance organizations (HMO) that offer coverage through Medicare — something those HMOs are lobbying heavily against.

Greenstein says that change alone could extend Medicare's solvency by an additional two years.

With 78 million baby boomers creeping ever closer to Medicare eligibility, everyone agrees that something will have to be done to shore up the program's finances. What no one agrees on — is what.

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