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Date: Thursday, April 24, 1997 FOR IMMEDIATE RELEASE Contact: HCFA Press Office(202) 690-6145
To address the short-term financial problems facing the Hospital Insurance (HI) trust fund, the trustees urged the enactment of legislation this year to reduce growth in HI program cost and extend the solvency of the HI trust fund.
The trustees also recommended the establishment of a national advisory group on Medicare reform to examine the Medicare program and develop recommendations for effective solutions to the long-term financing problem.
"Today's report makes clear that the time to act to preserve Medicare is now. With insolvency only four years away, the administration and the Congress have no time to waste. This problem demands prompt, effective and decisive action and we are committed to finding both short-term and long-term solutions," said HHS Secretary Donna E. Shalala.
Treasury Secretary Robert E. Rubin, managing trustee, said: "Preserving and modernizing Medicare is not a partisan issue. The administration and Congress can and should work together to enact
this year the reforms that will strengthen this program."
Shalala and Rubin noted that in 1993, the administration put forward, and the Congress enacted, a plan that extended the life of the trust fund by about three years.
They added that President Clinton has proposed a plan that is estimated to extend the life of the HI trust fund until 2008, more than a decade from now, while modernizing, reforming and strengthening the program. The new solvency projection for t he president's proposal was made by HCFA actuaries today and is based on the assumptions contained in today's report.
As part of his comprehensive plan to balance the federal budget, President Clinton has proposed Medicare savings provisions totaling about $100 billion over the next five years.
The trustees issue annual reports to Congress on the HI and Supplementary Medical Insurance (SMI) trust funds.
Today's HI Trust Fund report said the fund currently does not meet the short-range test of financial adequacy. Income and assets, the trustees said, are not sufficient to support projected expenditures beyond four years, under a set of intermedia te cost assumptions.
The trustees call for prompt action to ensure short-term solvency. They further called for using the time gained to determine effective solutions to the program's serious long-term financial imbalance.
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 services, independent laboratory services, and durable medical equipment. The SMI program is financed mostly by general revenues of the government and by monthly premiums paid by beneficiaries. The 1997 premium is $43.80 a month, a modest increase from the 1996 premium of $42.50 a month.
The trustees said the SMI fund was expected to remain adequately financed for the future. This is because current law provides for automatic increases in beneficiary premiums and government general revenue contributions to meet expected costs.
The trustees did express concern that, in the past five years, SMI program expenditures have grown about 14 percent faster than the overall economy, despite efforts to control SMI costs. This trend is expected to continue under current law. The trustees urged Congress to take additional actions designed to control SMI costs in the near future and to develop legislative proposals to deal with SMI' long-term cost increases associated with the retirement of the "baby-boom" generation.
The six trustees include, in addition to Secretaries Rubin and Shalala, two other trustees who serve automatically because of their government positions: Acting Labor Secretary Cynthia A. Metzler and Acting Social Security Commissioner John J. Ca llahan.
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. Bruce C. Vladeck, admini strator of the Health Care Financing Administration, serves as secretary to the board of trustees.