WASHINGTON -- In a mixed blessing for reform efforts, the trust funds that finance Medicare and Social Security are enjoying a surge of income from the booming economy that will stave off bankruptcy for years longer than previously predicted, the Clinton administration said yesterday.

Medicare, the popular health care program that serves 37 million elderly and disabled Americans, will be solvent for seven years longer, to 2015, according to a trustees report. For Social Security, which pays retirement and disability benefits to 44 million people, increased income expected from payroll taxes means solvency until 2034 -- an additional two years.

"This is a reversal of the trend, from the era of budget deficits to the era of budget surpluses," said Treasury Secretary Robert E. Rubin. "We have an opportunity we should take advantage of."

In the past two years, the trustees have pushed the date of Social Security's insolvency back five years while adding 14 years to the life of the Medicare fund.

Celebration over the bonanza was tempered with a large dose of caution.

The extra money gives the president and Congress more time to reach agreement on reforms that will help the two programs meet the long-term financial burden associated with the aging of the baby boom generation. But it also reduces the urgency of politically difficult decisions, probably leaving the problems for President Clinton's successor.

"Some might say this good news means we can simply delay reforms," Clinton said yesterday during a Rose Garden ceremony. "Nothing could be further from the truth. Now is the time to make those changes. Now, when we have time on our side."

Time is not always an asset in Washington.

A bipartisan commission appointed by Clinton and the Republican-led Congress to recommend Medicare reforms spent a year trying to break a deadlock before giving up last month. Each side questioned whether the other considered Medicare reform a priority, even before the income surge took the pressure off.

'The last nail'

"This puts the last nail in the coffin of doing Medicare reform this year," Rep. Benjamin L. Cardin, a Baltimore Democrat, said of the trustees' report.

Clinton has promised to unveil his Medicare reform proposal this spring, perhaps setting the stage for a campaign battle next year over whether Democrats or Republicans are more committed to saving the program. Some Republicans fear that the Democrats will use Medicare to try to regain control of the House.

But Cardin predicted that neither party would tout Medicare reform during the campaign, saying that modernizing the health care delivery system for the elderly is a difficult task that doesn't demand to be dealt with now.

"Seven more years is a really long time," Cardin said.

Making structural changes in Social Security, such as raising the eligibility age and limiting payments for upper-income beneficiaries, appears even less likely.

Neither party has reform legislation on the table. Instead, Clinton and the Republican congressional leaders have limited their proposals to using most of the budget surplus to "save" Social Security by reducing the federal debt -- thus shrinking future interest payments.

Danger of complacency

But stashing the money away doesn't make the Social Security program more affordable or change the projections on insolvency.

"There's a real danger that people will get complacent just because the Social Security trust fund doesn't go into deficit until 2034," said Craig Cheslog of the Concord Coalition, which promotes balanced budgets.

Even by yesterday's estimates, payroll taxes that finance the Social Security trust fund will run short of the amount needed to pay benefits by 2014, soon after the baby boomers start collecting. The fund is projected to stay in the black for another two decades only because it will be using the huge surpluses that have been accumulating for years to help pay benefits.

"We're basically just treading water here," Cheslog said.

Difficult reforms

Several key Republican lawmakers echoed Clinton's theme that while waiting is tempting, the job of reform won't get any easier.

"We must not lose focus," said Rep. Clay Shaw of Florida, chairman of the Ways and Means Social Security subcommittee. "The longer we delay true reform, the more difficult it will be."

Most of the revenue increase announced yesterday was attributed to the robust economy, which is pumping more money into the Medicare and Social Security trust funds through automatic payroll taxes. Low unemployment means that more people are working and paying those taxes.

Health Secretary Donna E. Shalala said yesterday that Medicare's fiscal picture was further brightened by the reforms passed by Congress after a deal with Clinton in 1997.

The payment system was streamlined and made more efficient, a major effort was undertaken to crack down on Medicare fraud and abuse, and preventive services -- such as flu shots and cancer screenings -- were added to the benefits package, reducing expenses for illnesses caught early or prevented.

"We didn't get here just by riding a very strong economy," Shalala said. "It took very sound management."

'Breathing room'

The full impact of the changes made to the Medicare program in 1997 is unknown, however, and some influential forces in the debate over reforms welcomed the extra time to consider those changes.

"This means no one can go around saying, 'The sky is falling, the sky is falling,' " said Martin Corry, lobbyist for the American Association of Retired Persons. "We've got some breathing room to do it right, hopefully on a gradual basis without sticker shock."

Pub Date: 3/31/99