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Medicare, Social Security Financial Health Upgraded

By Glenn Kessler
THE WASHINGTON POST -- A booming economy and a slowdown in Medicare spending has extended the financial life of the old-age health program from 2015 to 2023, the most upbeat assessment by the program’s trustees in a quarter-century.

The report -- and an almost equally positive evaluation of the Social Security trust fund -- could increase pressure on Congress to add new benefits to the Medicare program without bothering to tackle fundamental changes that would deal with the looming retirement of the baby-boom generation, lawmakers said. Democrats and Republicans alike have offered competing bills that would provide a prescription drug benefit to the Medicare program.

The Medicare trust fund, which pays hospital costs for 39 million Americans, gained eight years in its projected solvency in the past year. The Social Security fund is projected to last until 2037, an increase of three years.

Administration officials and several members of Congress warned that the reports should not delay action on dealing with the baby-boom retirement crisis, when the number of workers per beneficiary is expected to drop from 3.4 today to just over 2 in 2030.

Baby boomers, who were born between 1946 and 1964, will begin to retire by the end of the decade, and the Medicare report projects enrollment will double, to 81 million, by 2035. When that happens, the trustees warn, the cost of caring for those retirees will overwhelm the system as it’s now structured.

“There is one downside to this year’s good news,” said Health and Human Services Secretary Donna Shalala, one of the trustees. “It invites complacency, and complacency is a prescription for disaster.”

President Clinton, speaking to several hundred people at an event at the Selfhelp Austin Street Senior Center in Queens, N.Y., said the reports demonstrated progress but also pressed for his plan to provide a prescription drug benefit to seniors.

But Sen. John B. Breaux, D-La., a leading advocate of major overhaul of the big entitlement programs, warned that prolonged solvency does nothing to address long-term needs of Medicare and Social Security, and could undermine efforts to put the two programs on a sounder financial footing.

“Extending the solvency of Medicare and Social Security for a couple more years does nothing to modernize the structure of both these vital programs and, in fact, reduces the sense of urgency that improvements need to be made soon to protect the 77 million baby boomers who start retiring in the next 10 years,” Breaux said.

Sen. Bill Frist, R-Tenn., another proponent of restructuring Medicare, suggested the new solvency projections might make it easier to add prescription drug benefits to Medicare but urged that they be tied to more fundamental reform.

“Prescription drugs and reform must still go hand-in-hand if we are to weather the upcoming democratic shift and take full advantage of breathtaking advances in medicine and technology,” he said.

If anything, the trustee reports -- which surprised many budget experts -- show how good economic news and a little luck can radically change the financial picture of the these retirement programs, which account for nearly 40 percent of the federal budget.