WASHINGTON, D.C.-The Medicare Hospital Insurance Trust Fund would become insolvent in the year 2010-15 years sooner than currently projected-if President Bush's proposed budget is enacted, according to a new report issued by the consumer health organization Families USA.
The report indicates the President's proposed budget would divert $526 billion over the next 10 years out of the Trust Fund, and those funds would become available to the government's general fund. Additionally, because of this diversion, Families USA estimates the Trust Fund would lose approximately $172.5 billion in interest payments over the same period as the Trust Fund's reserves are depleted.
The latest projection by the Trust Fund's trustees, issued last year, was that insolvency would not occur until 2025.
"The President's budget plays a shell game with more than half a trillion dollars of Medicare funds," said Ron Pollack, Families USA's executive director. "At the end of that game, the program's Trust Fund is bankrupted and the Fund's losses help to finance almost one-third of the President's proposed $1.6 trillion tax cut."
By the end of the 10-year budget cycle, in 2011, the Trust Fund would have an accumulated debt of $105.8 billion instead of a surplus of $592.7 billion, according to the Families USA report. That indebtedness would occur at a crucial period, just as the baby-boom generation becomes eligible for Medicare.
The Congressional Budget Office estimates that, without changes in current law, payroll tax receipts plus interest coming into the Medicare Hospital Insurance Trust Fund would exceed expenditures in each and every year during this 10-year, 2002-2011 budget cycle. This forestalls the Trust Fund's projected insolvency until 2025. The President's budget, however, would result in more money going out of the Trust Fund than coming in starting in the year 2003 and each year thereafter, according to the report. These annual deficits cause the Trust Fund's bankruptcy in 2010.
"Instead of strengthening Medicare, the President's proposed budget weakens it," Pollack said. "It makes little sense to trade the health care security of middle- and moderate-income seniors for a tax cut that disproportionately helps the rich."
The Medicare Hospital Trust Fund (so-called "Part A" of the program) helps pay for the inpatient hospital, home health, skilled nursing facility, and hospice care for seniors and people with disabilities. It is funded through a dedicated payroll tax. Employers and their workers each pay 1.45 percent of earnings into the Trust Fund.
Medicare Part B pays for physician, outpatient hospital, home health, and other services. It is financed through a combination of beneficiary premiums and general revenues.
The Medicare legislation specifies that 25 percent of Part B costs should be raised through beneficiary premiums; in 2001, the monthly premium paid by beneficiaries is $50. The remaining 75 percent of Part B is financed through general revenues. Families USA is a non-profit, non-partisan organization dedicated to the achievement of high-quality, affordable health care for all Americans. The report is available on the Families USA website, www.familiesusa.org.
