Medicare licks its wounds

Medicare could pour salt on the wounded hospital industry. Seeking a cure for its own financial woes, Medicare may pull the knife on hospitals in an effort to save itself. Otherwise, the tax-funded health insurance program - forced to cover massive crowds of aging baby boomers - could wind up bankrupt in just 15 years.

The government issued its dark prognosis, essentially cutting seven years from Medicare's life expectancy following its latest annual checkup of the big insurance program. In a startling report published Tuesday, the government warned that Medicare needs swift - and drastic - treatment if the program hopes to survive, report thestreet.com

Medicare is facing serious financial problems in the next decade, exacerbated by the recent passage of a prescription drug benefit the price of which now appears to have been grossly underestimated by its advocates, an annual report of the program's trustees concluded this week. Social Security is also facing problems, but they are less pressing, according to a yearly report issued by that system's trustees.Although many of the numbers in the trustees' reports sound dire, some problems are overstated and, given that predicted "asset exhaustion" is years away, there is time to craft new policies that avert the crisis. With Medicare, a good first step would be a real discussion of reigning in health-care costs without following the Bush administration's push toward privatization, which will cost more in the long run.

The Hospital Insurance Trust Fund, which helps pay for hospital, home health, skilled nursing facility and hospice care for the aged and disabled, is projected to run out of money in 2019, seven years earlier than the trustees predicted in last year's report. This is because expenditures were higher than expected, due in part to increased payments to private health plans and rural hospitals as part of the Medicare overhaul, and the payroll taxes collected to fund the trust were lower than expected due to slow wage growth. The changes in the Medicare law, including the new prescription drug law that the White House now says will cost $530 billion over 10 years, passed last year, worsened the problem, the trustees wrote.

Lawmakers should keep in mind is that revenue was available to prop up both systems without making any changes. If the 2001 and 2003 tax cuts are made permanent as the Bush Administration has proposed, their cost over 75 years will be $10 trillion to $12 trillion - about three times the Social Security shortfall and about the same size as the Social Security and Medicare Hospital Insurance shortfalls combined, according to the liberal Center on Budget and Policy Priorities, reports bangornews.com