Medicare fiscal woes accelerate Hospitalization fund predicted to go broke in five years, not six; GOP was right, Dole says; Expert calls deficit a 'contrived crisis'; Shalala wants action

WASHINGTON — WASHINGTON -- The part of Medicare that pays for hospital visits will be insolvent in five years -- one year sooner than previously thought -- unless changes are made quickly, the Clinton administration conceded yesterday.

"These circumstances require action," said Donna E. Shalala, secretary of health and human services.


Republicans, whose plan to trim Medicare growth was criticized as excessive vetoed last year by President Clinton, seized on the trustees' report as evidence that they have been right all along.

They also contended that the report showed that the nation's retirees could pay a steep price for the politics Democrats have played on the issue.


In remarks on the Senate floor, Bob Dole, the likely Republican presidential nominee, contended that yesterday's report by the Medicare trustees shows that "18 months of misleading rhetoric" from the Democrats may have gained them "points in the opinion polls, [but] it also put Medicare about $90 billion plus in the red."

Not everyone is convinced that the problem is so grave. Patrick Burns, a spokesman for the National Council of Senior Citizens, suggested that the real flaw may be more in politics than the Medicare program itself.

"Basically, this a contrived crisis," said Burns, who added that being five or six years away from seeming disaster has been fairly typical for Medicare in recent history. "It's a game of political mud-throwing by Republicans and Democrats."

Medicare is divided into two parts. The hospitalization portion (Part A) covers overnight stays as well as long-term care. These costs are covered by a payroll tax, split between employers and employees.

The other portion (Part B) pays for doctor visits and medical equipment. It is financed by the regular federal budget, with some costs -- currently 25 percent -- covered by the premiums paid by the senior citizens who use it.

Last year, Republicans proposed trimming the expected growth of the program by $270 billion. Clinton, who had countered with a figure of $124 billion, vetoed the Republican plan -- along with tax cuts and the rest of the Republican budget -- in December.

The president insisted that the Republican plan to gradually increase premiums to cover 33 percent of Part A was too extreme and that the Republicans were pushing Medicare patients into managed care too fast. He also said the Republican plan trimmed the rate of growth faster than necessary.

Today, the gap between congressional Republicans and the White House is narrower: In their latest budget, the Republicans propose cutting the growth of Medicare by $158 billion over six years, compared with $116 billion in savings offered by Clinton.


In the meantime, Part A is running short, according to yesterday's report, for three reasons:

Spending on home health, nursing and hospice care is rising faster than projected.

Hospitals are billing the government more quickly and performing more complex medical procedures on elderly patients.

The administration overestimated the tax revenue that would be available to finance Medicare.

"These kinds of fluctuations are not uncommon," Shalala said. "In fact, two years ago, we also estimated [it] would be depleted in 2001."

How to fix Part A, at least in the short run, is no great mystery, according to both sides. One idea is to lower the reimbursement rates for hospitals and nursing homes, an option mentioned by Shalala yesterday.


Another idea both parties have floated is moving the financing of home-care visits from Part A to Part B. The Clinton administration has proposed doing so after 100 visits; Republicans have suggested doing it after 165 visits.

"We have the ability right now to put 10 years on the life of that trust fund, and we ought to just do it," the president said as entered a meeting with House and Senate Democrats. "The differences in our numbers are not that dramatic."

Even many of his critics agree. But if the math of these equations appears to be solvable, the politics are difficult at best.

For the past eight months, Clinton's popularity has been rising -- and that of congressional Republicans plummeting -- in the face of Democratic accusations that Republicans favor "extreme" cuts in Medicare and other social programs, far in excess of what is required, to help pay for tax cuts to benefit the wealthy.

This accusation has been made by Clinton, members of his Cabinet, Democrats in Congress and Democratic candidates for office. And it is the central theme in an unusual ad campaign coordinated among the White House, the AFL-CIO and the Democratic National Committee.

"Their goal has been to raid Medicare, not to save it, to lavish more tax breaks on the very people who don't need them," Rep. Richard A. Gephardt, the House Democratic leader, said of Republicans yesterday, even as the report was being released.


This is precisely the kind of verbal hand grenade that Dole and other Republicans say has helped produce a stalemate over resolving the Medicare shortfall.

Even so, both sides revealed yesterday that even in an election-year, they recognize the prescription to cure Medicare: a dose of bipartisanship.

"Last year, Congress passed a plan -- vetoed by President Clinton -- that would have assured Medicare's solvency through the time the baby boom generation begins to retire," said Sen. William V. Roth Jr., the Republican chairman of the Senate Finance Committee. "But Republicans cannot do it alone again -- and have our solutions again become fodder for false, partisan, election-year ads. We need to address Medicare's problems in a constructive, bipartisan manner."

"The trends that we've reported today must be addressed," said Treasury Secretary Robert E. Rubin. "And they must be done so on a bipartisan basis."

Pub Date: 6/06/96