Medicare Penury Goads Washington Into Action

But politics may be harder to overcome than the finances

Continued warnings about Medicare's dire financial straits are increasing pressure on Washington politicians to cut their bickering and agree to some kind of fiscal fix for the huge federal health-insurance program.

A compromise may not occur until after the November elections. Still, experts warn that something needs to happen, and fast. That's because Medicare really faces two problems: short-term bankruptcy looming in 2001 and a long-term crunch when the bulk of the baby boom retires a decade or so later. The sooner the first problem is fixed, the sooner everyone involved can focus on the second, larger issue.

And delay may only postpone the inevitable. Medicare will be repaired, one way or another, most experts agree. It is too big, too successful, and too popular for Washington to allow it to wither away. "When the precipice looms, the steps will get taken," says Ed Howard, executive vice president of the Washington-based Alliance for Health Reform. "It's not pretty but it's sort of the way it happens."

Medicare's money troubles will be highlighted June 5, with release of an official trustee report likely to judge that the trust fund used to pay the program's hospital bills will run out of money in 2001, instead of the previous prediction of 2002.

(The big Medicare program is made up of two parts. The hospital trust fund, known as Part A, is funded by a payroll tax on working Americans. Part B, which pays for doctor visits, gets its money from premiums paid by beneficiaries and a subsidy from general US revenues.)

The trustees' estimates follow a Congressional Budget Office (CBO) paper issued earlier this month, which also judged that the Medicare hospital trust fund would go bankrupt faster than thought and accumulate larger deficits in coming years than old figures had suggested.

Last year, for instance, CBO estimated that the hospital fund would run $3 billion in the black in 1995. In fact, the fund ran slightly in the red - a development that CBO officials blamed on higher-than-expected admissions and a change in the mix of hospital cases.

Last year overall Medicare spending was about $180 billion. CBO now says that in the absence of policy changes, Medicare's outlays will be double that by 2003.

These latest figures should come as no surprise, say CBO officials and other experts. They simply reflect a long-known trend: Medicare has more cash flowing out than coming in. Today's trustee report "is sort of the third time that Paul Revere has said the British are coming," notes Beau Boulter, legislative director of the United Seniors Association, a group that supports GOP solutions to the problem.

Against this background Republicans and Democrats have been squabbling over Medicare in recent days. On June 2, House Speaker Rep. Newt Gingrich (R) of Georgia said that the Clinton administration was saying "false things" about Republican Medicare solutions in order to win the votes of the elderly. A day later, Senate Democratic leader Tom Daschle of (D) South Dakota shot back "the Republicans want to end welfare as we know it."

Both sides have their own plans for shoring up the Part A hospital trust fund. Republicans want to put strict limits on the fund's spending, restraining its growth by about $120 billion through 2002. This move would fend off bankruptcy until 2007, GOP experts say - but they admit that implementing the cost restrictions could be difficult.

The White House, by contrast, proposes reducing Part A's growth by $72 billion over the next six years. But Democrats would also shift one of the hospital fund's fastest-growing expenses - home health care - over to the Part B fund. Since Part B is partly paid for by general revenue, this move in essence is an accounting shift, not a cost reduction.

IF one party or the other captures both Congress and the White House this fall, their approach may well win. But if America still has divided government after the November, experts expect the final solution will be a melding of the proposals now on the table.

"Once the election is over we'll come up with a solution to the short-term problem that looks a lot like a compromise between the two," predicted Brandeis University health policy expert Stuart Altman at a Washington seminar June 3.

But then the US will still face a long-term Medicare problem. When baby boomers start drawing heavily on the program, beginning around 2010, the same revenue-spending mismatch will reappear. "We've got a short-term mentality. We''e not getting any long-term solutions," complained Dick Davidson, president of the American Hospital Association, at the seminar.

Mr. Davidson's proposal: a full-time, independent Medicare commission. The panel would take congressional spending targets and translate them into proposed benefits packages for an up-or-down legislative vote.

Commission members would be appointed by the President and confirmed by the Senate, said Davidson. A bill to establish such a body was introduced in Congress last year, but has made little progress.