Health policy experts worry that a slight improvement in Medicare's near-term solvency reported last week will only help to doom an already slim chance that Congress will enact sweeping reforms to the program this year.
The Hospital Insurance Trust Fund, the federal nest egg primarily used for Medicare inpatient expenses, will be solvent until 2030, according to the latest annual report from Medicare's trustees. Last year, the trustees projected that the fund, also called the Part A trust fund, would be solvent until 2029.
One economist described it as the ultimate good news/bad news story.
"I am glad to see the program in slightly more robust shape, but I fear that it will make it even more difficult to get the kind of reform that many of us believe that Medicare so desperately needs," said Gail Wilensky, a fellow at Project HOPE, a Washington think tank. Wilensky is also a former administrator for HCFA, now the Centers for Medicare and Medicaid Services.
HHS Secretary Tommy Thompson, who serves as a Medicare trustee, used the issuance of the report to renew the Bush administration's call for an overhaul of the program.
"The fiscal health of the Medicare system remains in serious condition," Thompson said during a news conference with other trustees, including Treasury Secretary Paul O'Neill and Labor Secretary Elaine Chao.
Payroll taxes are the primary source of the Part A fund, which took in $31.3 billion more than it spent in 2001. But expenditures will exceed new revenue beginning in 2016, the trustees projected.
To balance the fund over the next 75 years, outlays would have to be reduced by 38%, income increased by 60% or some combination of the two. Total Medicare expenditures, which equaled 2.4% of the gross domestic product in 2001, are projected to rise to 8.6% of the GDP by 2076.
"We must act to strengthen Medicare this year, and the president has put forward an effective framework for doing so," Thompson said.
Last July, President Bush proposed eight principles for reforming Medicare, including combining Medicare Part A, for inpatient care, and Part B, which covers outpatient and physician services. The American Hospital Association opposes such a move.
"Making sure that we are clearly and appropriately financing hospital care is important," said Carmela Coyle, the AHA's senior vice president for policy. She said merging Parts A and B would represent "a potential fundamental shift in the way that seniors' benefits are financed."
Yet Medicare trustees have argued that the separation of Part A and Part B, which was established when the program was created in 1965 and outpatient expenses were relatively small, is outdated. In 2001, Part A expenditures were $141.2 billion, while Part B outlays were $99.7 billion.
Congress has taken advantage of the divided financing setup to mask Medicare costs in the past. The Balanced Budget Act of 1997 reduced Part A expenditures by about $40.4 billion from 1998 to 2002 by gradually diverting to Part B the cost of some home health services.
"One good reason for combining these two things is honesty. These (numbers) are what the program costs," said Thomas Saving, an economics professor at Texas A&M University and one of Medicare's two public trustees.
For the first time, the status of Medicare funding for Parts A and B was updated in the same report this year. Asked last week if the change reflects the administration's desire to combine the parts, Thompson quickly answered, "Yes, it does."
Administration officials and Republicans on Capitol Hill served up other ideas for fixing Medicare last week.
Ways and Means Committee Chairman William Thomas (R-Calif.) called for more competition. "We still need to modernize and strengthen Medicare, and increased competition will allow us to improve benefits and add prescription drug coverage for seniors, while keeping costs down," Thomas said in a written statement.
Others asserted that costs could be reduced by improving the quality of care.
"The problem of medical errors is just the tip of the iceberg of systemic problems, which, if resolved, could significantly improve the quality of healthcare and help to reduce costs," O'Neill said.
"Medicare is not delivering the kind of healthcare, the quality of healthcare, that senior citizens deserve," White House Budget Director Mitchell Daniels said during a speech last week.
But one economist said that though efforts to improve Medicare quality are noble, they will not bring about needed changes to Medicare. "We shouldn't pretend that those opportunities are necessarily, in any way, going to lessen the extraordinarily tough choices that we have to make," said Eugene Steuerle, a senior fellow at the Urban Institute, a Washington think tank.
Steuerle said Congress will need to pass laws changing Medicare's benefits or the level of taxes used to finance the program, or a combination of the two.
While the Part A trust fund is paid for with payroll taxes, the Part B trust fund is financed with beneficiary premiums and general revenue funds from the federal budget.
Thompson said last week, "We have a great opportunity this year to get something done" to reform Medicare, despite the distraction of the November elections. Bush continues to oppose a Medicare prescription-drug benefit unless it's part of a Medicare overhaul, Thompson said.
But according to one Republican congressional staffer, who requested anonymity, a bill calling for substantial Medicare reform is unlikely to pass both the House and Senate this year.