Dire Medicare news fuels fight: Money expected to dry up in 8 years

WASHINGTON — Spurring new demands to overhaul the nation's health-care system, Medicare trustees announced Tuesday that the program's biggest fund for serving the elderly would run out of money in eight years.

But the announcement — the latest in a succession of dire predictions about Medicare's fiscal condition — also pointed up the growing chasm separating Democrats and Republicans as the Obama administration and its congressional allies ramp up for another major attempt to reshape health care as a whole.

GOP lawmakers seized on the latest announcement to attack Democratic proposals to create a new government health-insurance program that people could choose if they are unhappy with their private insurance options. Such a "public option" is a centerpiece of President Obama's health-care agenda.

"The government-run health-care programs we already have are unsustainable," said Rep. Tom Price, R-Ga., who heads the House Republican Study Committee. "It should be obvious that putting more people under the inflexible control of Washington is no way to bring down medical costs, and it's certainly no way to provide health care of the highest quality."

Administration officials and their allies on Capitol Hill, meanwhile, cast Medicare's troubles as an opportunity to advance their campaign.

"Medicare is central to the effort to promote high-quality, affordable health care for all Americans," said Health and Human Services Secretary Kathleen Sebelius, a member of the Social Security and Medicare board of trustees. "As the nation's largest insurer, its success would both improve the lives of seniors and set the standard for other insurance companies."

Medicare, in its fifth decade, provides health insurance to some 45 million people, mostly senior citizens. But the impending eligibility of baby boomers, who will start joining Medicare in 2011, and the unrelenting increase in health-care costs have driven concerns in recent years about the program's long-term viability.

The present economic downturn, in which 5.7 million jobs have been lost, reducing workers' payments into the system, has further eroded Medicare's hospital trust fund.

As recently as 2002, trustees projected the fund had enough reserves to remain solvent until 2030, although they warned five years earlier of a collapse by 2001, precipitating a rescue by Congress.

Medicare already is paying out more money than it receives, something that happened for the first time last year. And Social Security will be by 2016, a year sooner than had been projected, the trustees' annual report said.

The Social Security Trust Fund is expected to run out of money in 2037, according to the trustees' report.

Both programs are financed primarily by taxes — 15.3 percent of wages, evenly divided between workers and employers.

Workers now can retire with full Social Security benefits at age 66. The retirement age is to rise gradually to 67 for those born in 1960 or later. One option for cutting benefits would be to increase the retirement age even further.

On Tuesday, outside groups pushing to overhaul the nation's health-care system joined senior administration officials in citing the latest Medicare assessment as evidence that comprehensive change is needed.

AARP Executive Vice President John Rother called the report a "clarion call for health-care reform." Obama and groups such as the AARP are pushing for cuts in how much the federal government pays private insurers who contract to provide Medicare insurance for seniors as well as faster approval of generic drugs. Both steps challenge major health-care industries.

The president and his allies on Capitol Hill also are exploring broader changes in the way Medicare pays for services, including new penalties on hospitals and doctors who don't meet new quality standards.

The Associated Press contributed to this report.