Administration Says Medicare Solvency Extension ‘No Excuse for Complacency’ on Reform, While Democrats Call for Rx Coverage

As reported in the Health Policy Report March 19, the Medicare Part A trust fund will not run out of money until 2029, four years later than estimates a year ago, the program's trustees said in their annual report. The Wall Street Journal explains that in spite of the more positive forecast, the program is "still going broke" (McKinnon, Wall Street Journal, 3/20). Medicare Part A, the Hospital Insurance Trust Fund, funds hospital, home health, skilled nursing facility and hospice care for Medicare beneficiaries. The annual report, issued by a board of six trustees -- including Treasury Secretary Paul O'Neill, Labor Secretary Elaine Chao, HHS Secretary Tommy Thompson, Acting Social Security Commissioner William Halter and two presidentially appointed scholars -- attributed the improved outlook to "stronger-than-expected economic growth and lower-than-expected program costs" (Pear, New York Times, 3/20). While the trustees called the short-term financial status of the trust fund "favorable," with Medicare Part A income exceeding spending by $36.1 billion last year -- the third consecutive year of surplus -- they predicted that income will "fall short" of spending in 20 years. They added that the program could use trust fund assets to pay benefits for an additional eight years after that ("2001 Annual Report of the Board of Trustees of the Federal Hospital Insurance Trust Fund," 3/19).

Sounds 'Like Bad News'?
The New York Times reports that the Bush administration "took what appeared to be good news" about the financial outlook of Medicare and "made it sound like bad news" (New York Times, 3/20). President Bush said that the report "underline[s] and add[s] an exclamation point to the need to reform and strengthen" Medicare, adding, "We only have so many years to get the syste[m] back on track" (Pugh, Philadelphia Inquirer, 3/20). In addition, Bush said, "I'm prepared to spend the political capital ... to do so" (Rosenblatt, Los Angeles Times, 3/20). Saying that Medicare "cr[ies] out for reform," O'Neill compared his feeling about the program to being "in the middle of an auto accident before you hit something" (Wall Street Journal, 3/20). Thompson said that lawmakers must move "quickly" to reform Medicare and add a prescription drug benefit to the program, adding, "Every year of delay makes the options more difficult" (Koffler, CongressDaily, 3/19). The Wall Street Journal reports that the Bush administration will issue a set of broad "principles" for Medicare reform, including a drug benefit, but will allow Congress to "fill in many of the blanks" (Wall Street Journal, 3/20). Calling the report on Medicare a "sobering picture," Senate Finance Committee Chair Charles Grassley (R-Iowa) said that he would hold a joint hearing with the House Ways and Means Committee today to discuss the issue (Philadelphia Inquirer, 3/20).

Some 'Rejoiced'
Meanwhile, Democrats "rejoiced" at the new Medicare report, saying that Congress could add a prescription drug benefit to the program without making "radical" reforms (New York Times, 3/20). "There is no need to condition passage of a prescription drug benefit this year on passage of radical changes to the underlying program," Sen. Edward Kennedy (D-Mass.) said (Kirchhoff, Boston Globe, 3/20). However, Thompson said that the "momentum" to add a drug benefit to Medicare should include an "overhaul" of the program. "Why don't we do the whole thing now?" he asked, adding, "We have the time and means to modernize and improve Medicare. This report tells us we must" (AP/Washington Times, 3/20). Democrats also said that the "long-term implications" of the report were that Bush's 10-year, $1.6 trillion tax cut package would "drain needed revenue" from Medicare (Kessler, Washington Post, 3/20). Rep. Pete Stark (D-Calif.) said, "The trustees' report makes clear that Republican claims about Medicare's so-called financing crisis are simply an excuse to raid the Medicare surplus to pay for tax breaks for the wealthy" (New York Times, 3/20). Senate Minority Leader Tom Daschle (D-S.D.) said, "We should build on the progress we've made and take the necessary steps to ensure that every penny of the Medicare surplus is preserved for its intended purpose. Unfortunately, President Bush's budget does the exact opposite" (Los Angeles Times, 3/20).

A Healthcast of the joint Senate Finance and House Ways and Means Committee hearing on Social Security and Medicare will be available for viewing March 20 after 5 p.m. ET. Visit http://www.kaisernetwork.org/healthcast/ways&means/finance/medicare/mar01 for more information. To view a Healthcast of the House Ways and Means Committee hearing on "Medicare Solvency," go to www.kaisernetwork.org/healthcast/ways&means/medicaresolvency/mar01. This hearing will be available for viewing March 21 after 12 p.m. ET.