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Amid Trust Fund Report, Clinton Proposes New Medicare Bailout

By Robert A. Rosenblatt and Edwin Chen
Los Angeles Times

Medicare's hospital trust fund is only four years away from bankruptcy, the government reported Thursday, prompting the Clinton administration to insist that any budget deal this year must include a financial rescue of the massive medical program for the elderly and disabled.

The hospital trust fund will run out of money in the latter part of 2001, according to the annual report issued by the system's trustees. Social Security is in much better shape, the report said, because the retirement trust fund will not face a deficit until the year 2029.

While the projected doomsday dates for the programs are no earlier than in last year's trustees' report, the political and fiscal pressure is more intense because another year has elapsed without significant reforms to deal with rising costs in either program.

President Clinton will not accept a budget agreement with the Republican Congress unless it provides Medicare savings that extend the hospital trust fund's life another seven years, until 2008, Health and Human Services Secretary Donna Shalala said Thursday.

However, cooperation may be difficult. Sen. William V. Roth Jr., R-Del.,and several other Senate Republicans pointedly recalled being "ravaged," in the words of Sen. Paul Coverdell of Georgia, by the Democrats in the 1996 campaign for having proposed reductions in the growth of Medicare while seeking a broad tax cut.

Among the Medicare reforms Republicans are seeking, according to Sen. Don Nickles, R-Okla., is an expansion of health-care choices for seniors. It would be modeled after the popular Federal Employees Health Benefit Program, which covers about 10 million government workers, retirees and their dependents.

Democrats are balking at Republican budget-package proposals. Sen. John D. Rockefeller IV, D-W.Va., said the GOP's stated desire to cut capital gains and estate taxes poses "the real danger here" and stands in the way of a Medicare solution.

As the majority party in both houses of Congress, the Republicans have the upper hand in negotiations for changes in Medicare.

Shalala said if an agreement is reached this year on immediate fiscal repairs to Medicare, a bipartisan commission could be appointed to look for permanent financial solutions.

Any action this year or next will be just a short-term solution, giving future Congresses and presidents the burden of preserving the popular programs for the massive baby boom generation, which begins drawing benefits in the year 2011. Spending will soar - while there are 34 million persons over 65 today, there will be 61 million by the year 2025.

In private talks with congressional leaders, the administration has offered another $15 billion in future savings, which also would come from payments to providers rather than from Medicare beneficiaries.

Medicare will spend an estimated $208 billion this year on more than 38 million beneficiaries, helping to pay the medical bills of persons over 65, and the disabled of all ages.

The hospital trust fund, expected to go broke in 2001, is financed by a 1.45 percent payroll tax on all wages, paid by the worker and the employer.