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MEDICARE TRUSTEES ISSUE ANNUAL REPORTS

The Medicare Trustees today reported that the Hospital Insurance (HI) trust fund will remain solvent until the year 2015, based on the most probable economic and demographic assumptions. The projected depletion date has been extended by seven years from the forecast of 2008 made by the trustees last year.

The trustees credited the combination of the robust economy, as well as restrained expenditures due to HCFA's aggressive management of the system and structural reforms accomplished by the Balanced Budget Act, for extending the life of the trust fund and cutting the projected 75-year actuarial deficit by nearly one third since the 1998 report.

"The groundbreaking achievements of the Medicare reform provisions of the historic Balanced Budget Act -- combined with the dramatic performance of the economy -- brought us to where we are today. In the last two years, we extended the life of the Trust Fund by a full 14 years, and cut the actuarial deficit by two-thirds," said Health and Human Services Secretary Donna E. Shalala.

"But, we must keep working for a consensus on how to protect and modernize Medicare. We must keep the promise we made 33 years ago to America's senior citizens. And we must keep the promise in the future," she added.

"We welcome these favorable developments for Social Security and Medicare. Nonetheless, the need to put these programs on sound financial footing for the long term must still be met," said Treasury Secretary Robert E. Rubin, managing trustee. "We should move forward on a bipartisan basis to finish the job by using the surpluses to pay down the national debt and substantially extend the exhaustion date of the Social Security and Medicare Trust Funds."

The new solvency projection was made by the trustees today, and is based on the assumptions contained in today's report. The Medicare Trustees issue annual reports to Congress on the Hospital Insurance (HI) and Supplementary Medical Insurance (SMI) trust funds.

The trustees' report again sounded concern over the rapid increases in costs to the SMI trust fund. The report calls on Congress to take action to control SMI costs as the baby boom generation approaches retirement.

Medicare hospital insurance helps pay for care given by hospitals, skilled nursing facilities, hospices, and home health agencies. The HI trust fund (Medicare Part A) is financed mainly by the Medicare portion of the Social Security payroll tax. The Medicare payroll tax rate of 2.9 percent consists of equal contributions of 1.45 percent from employers and employees. The SMI trust fund

(Medicare Part B) helps pay for the services of physicians and other health care professionals, outpatient hospital services and home health and other services. The SMI program is financed mostly by general revenues of the government and by monthly premiums paid by beneficiaries. The 1999 premium is $45.50, a slight increase over the 1998 premiums of $43.80.

The six trustees include, in addition to Secretaries Rubin and Shalala, two other trustees who serve automatically because of their government positions: Labor Secretary Alexis Herman and Social Security Commissioner Kenneth Apfel.

Two other members, the public trustees, are appointed by the President with Senate confirmation. The public trustees are Stephen G. Kellison and Marilyn Moon. They serve four-year terms and represent the general public. Nancy-Ann DeParle, administrator of the Health Care Financing Administration, serves as secretary to the board of trustees.

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Note: HHS press releases are available on the World Wide Web at: www.dhhs.gov.