Hospitals' fears were realized last week when the House Budget Committee approved a federal fiscal 2002 spending blueprint that uses the Medicare hospital fund surplus to pay for a prescription-drug benefit and Medicare modernization.
The party-line vote in favor of the Republican-sponsored resolution came the same week that a report said the Medicare Part A trust fund was healthier than it was last year but had dim long-term prospects.
The $1.9 trillion budget passed the committee by a vote of 23-19 and included President Bush's $1.6 trillion, 10-year tax cut. The budget pulls $393 billion from the Medicare Part A trust fund over 10 years, apportioning $153 billion for prescription drug coverage and Medicare restructuring during that time and putting $240 billion in a Medicare contingency fund.
The $153 billion equals the amount set aside in President Bush's budget blueprint, but it is $6 billion less than what the House budgeted for a drug benefit last year.
Democrats had proposed amendments that would have more than doubled the set-aside for the drug benefit alone, to $350 billion, and insulated the Part A trust fund from the rest of the general federal budget. Democrats also hoped to extend the trust fund's solvency by cutting President Bush's proposed 10-year tax cut by $910 billion and funneling half the difference to the fund.
Richard Pollack, executive vice president of the American Hospital Association, said Part A should be reserved for current benefits.
"It is our view that Medicare Part A should be used for Medicare Part A services, period," Pollack said before the vote. "This is the beginning of the game. This is the first inning, and we've still got a way to go."
Administration officials used the bleak long-term outlook for Medicare to back their argument that reforms to the program were necessary. They also pointed to growing spending in Medicare Part B, which is derived mostly from general tax revenue and used for noninstitutional care, such as physician, outpatient and home health, as a reason for reform. They argued that spending for Part B more than offset a so-called surplus and justified the transfer of $526 billion over 10 years in projected Part A surpluses into a federal contingency fund.
The Medicare Hospital Insurance Trust Fund, which was expected to go broke in 2025, is healthier than ever, according to federal projections released last week. But even though the fund is expected to remain solvent through 2029, the long view for Part A is not promising.
"The trustees have presented the most compelling case yet for the urgent need to repair and modernize this vital program," said Karen Ignagni, president and chief executive officer of the American Association of Health Plans.
Projected Medicare spending will have to be reduced 37% or tax revenue increased 60% in the next 75 years for the trust fund to remain in balance through that period, according to the report.
"It's tempting to look at just one number," said the fund's managing trustee, Treasury Secretary Paul O'Neill. Though the positive short-term outlook could chill efforts by President Bush and Republican congressional leaders to reform Medicare this year, long-term shortfalls in Medicare revenue should spur Congress to reform the program and develop better measures for its solvency, O'Neill told lawmakers last week.
"Twenty-nine years of solvency represents approximately 15 election cycles," the AHA's Pollack said. "People generally react when there's a more imminent emergency." Given that the trust fund is expected to be solvent over that period of time, that impetus may not be there, he said.
Another lobbyist offered a different view. "You can also say, `What better time to make changes?' " said Herb Kuhn, vice president of advocacy at the Premier hospital alliance, San Diego.
The budget resolution may come to a full vote in the House this week.