April 25, 1997

Everyone knew that there was not going to be any good news in yesterday's report on the Medicare Hospital Insurance trust fund (Part A) -- the only question was how bad the bad news was going to be. It hardly could have been worse. According to the trustees' summary report: "Under the intermediate (best estimate) assumptions in the 1997 Annual Reports, the fund will be depleted in early 2001 -- only fours years from now." As bad as that is, it is not even the worst- case scenario, which would be the one using the high-cost, rather than the intermediate assumptions. Again, according to the trustees: "Under high cost assumptions depletion would occur in 2000."

The trust fund closed last year with a balance of just $124.9 billion after losing $5.3 billion. That ending year balance of $124.9 billion is below the $128.6 billion total paid for beneficiaries' health care last year. The trust fund is expected to lose an additional $12.8 billion this year and finish the year with a balance of just $112.2 billion. Finally, under the estimated spending patterns, the trust fund would be bankrupt by mid-July of 2001.

As bad as all this news is, when it is juxtaposed with the Clinton Administration's position on the issue, the picture looks even worse. As a result of President Clinton vetoing the 104^th Congress's balanced budget bill -- which contained a Medicare reform plan and would have taken the trust fund out of its current crisis -- the trust fund will have lost $18 billion ($5.3 billion in 1996 and $12.8 billion in 1997). The trustees' report concludes: "As we have since 1992, we must report that the HI trust fund does not meet even our short-range test of financial adequacy."

What this means is that the Clinton White House has received a report of this crisis for each and every one of the five years in which this president has been in office. No other administration has ever received such a report in every year. The White House has received this report from the trustees -- two-thirds of whom are members of this administration. Yet, despite the reports of this crisis, the Clinton White House has done nothing. That is likely the worst news of this report for the 38 million seniors who depend on this program.

The trustees' report states the trust fund will be broke in "early 2001."

• Based on the trustees' report numbers, the trust fund will be broke in mid-July of 2001. The report expects the trust fund to end the year 2000 with just $25.5 billion and to lose $48.9 billion in 2001. Assuming an equal rate of loss, HI will be bankrupt in July 2001.
• It could be earlier, if the report's "high cost assumptions" are correct; if so, "depletion would occur in 2000."

• The question is whether the trust fund will survive past the Clinton presidency.

The trust fund continues to run deficits.

• This year will make the trust fund's third consecutive year of deficit spending.
• It ran a $2.6 billion deficit in 1995, a $5.3 billion deficit in 1996, and will run a $12.8 billion deficit in 1997.
• It will have just $112.2 billion at year's end -- less than the amount necessary to pay last year's beneficiaries' health bills of $128.6 billion.

The trust fund has been, and continues to be, in crisis.

• For every year of his presidency, Clinton has received this report from its trustees: "As we have since 1992, we must report that the HI trust fund does not meet even our short-range test of financial adequacy."
• This is not about the budget, it is about seniors' health care. If the budget were balanced today, Medicare would still be broke tomorrow.
• This is not a problem, it is a crisis. And it is a crisis bigger than the budget.

The President responds with demagoguery and gimmickry.

• The Medicare funding crisis cannot be solved with politics, demagoguery, or gimmicks, yet that is all President Clinton has offered for the last two years.
• Clinton's "Medi-scare," his partisan politics, and his demagoguery may have gotten four more years in the White House, but it has not gotten America's seniors another year for Medicare.
• In fact, it has cost them two years. Two years ago, Congress passed a plan (the 1995 Medicare Preservation Act) that would have given us the time to solve this before it became the crisis it is now.
• Clinton vetoed that plan. He did not propose another one. He responded with politics and gimmicks -- the $82 billion transfer of the home health care program from the Part A trust fund to the general taxpayer.
• Now we are out of time. Clinton must propose a real plan -- not a cost-shifting gimmick (as the Washington Post, 3/12/97, described it) that increases the taxpayers' burden without addressing Medicare's problems.
• If we are transferring the program to the taxpayer, how do we justify the payroll tax that working people are paying for Medicare? Clinton should just be honest and ask us to abolish the trust fund -- because that is what he is doing piece by piece.
• The home health transfer will not save one cent of Medicare spending.

If not this gimmick, what is the Clinton strategy?

• If Clinton keeps to the gimmick route, what will be the next one? What Medicare program will Clinton throw overboard next before he begins to fix the sinking ship?
• If Clinton intends to fix the long-term problem (actuarial balance over the next 25 years) with a tax increase -- as his refusal to reform the program implies -- the trustees state that it will be increasing the current HI payroll tax of 1.45 percent by 66 percent to 2.46 percent.
• Or is Clinton playing a dangerous "game of chicken" by trying to forestall Medicare's solution -- as he did with his "trigger" budget balancing gimmick -- past his presidency? The trustees write: "...[C]hanges enacted this year to slow Medicare's growth would achieve most of their savings in the year 2000 and beyond, dangerously close to when the HI Trust Fund will be exhausted."
• If so, it is a game that Clinton is playing with trust fund beneficiaries' money -- as the trustees again point out: "In every year that passes without change, we will have to consume more and more of the trust fund's assets to meet current needs."

The crisis is real and it is long-term and it will outlast this President. The only question is whether the trust fund itself will.

The trustees' summary concludes: "The Hospital Insurance (HI) Trust Fund, which pays inpatient hospital expenses, will be able to pay benefits for only about 4 years and is severely out of balance in the long range." Medicare's problems will not go away -- they will accelerate as the number of retirees increase. There are 38 million seniors waiting for leadership from this President; yet another report demonstrates clearly that it has yet to come.