Pay or Pay

HOUSE Speaker Newt Gingrich confused a lot of people with his recent talk about separating Medicare reform from the budget process. After all, any credible balanced-budget plan will have to deal with the $170-billion Medicare program. Yet Gingrich is right about one thing: Medicare’s looming fiscal crisis would have to be addressed even if the Republicans hadn’t promised to balance the budget. The problem is that the idea they have seized upon to “transform” Medicare probably won’t work.

Medicare’s latest annual report paints a grim picture. Despite more than a decade of cost-control efforts, Medicare costs are expected to grow by more than 10 per cent annually during the next five years. Under current rules Medicare’s Hospital Insurance program (Part A) will face a shortfall of $47 billion by 2002. When the baby-boomers start retiring, the deficit will top $100 billion; it will explode to $1.4 trillion by 2035. Part B, which covers physician services, is in even worse shape. Funded largely through the Treasury, with a small portion paid by the elderly in monthly premiums, Part B is expected to triple in cost over the next ten years.

JM

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John Merline

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HOUSE Speaker Newt Gingrich confused a lot of people with his recent talk about separating Medicare reform from the budget process. After all, any credible balanced-budget plan will have to deal with the $170-billion Medicare program. Yet Gingrich is right about one thing: Medicare’s looming fiscal crisis would have to be addressed even if the Republicans hadn’t promised to balance the budget. The problem is that the idea they have seized upon to “transform” Medicare probably won’t work.

Medicare’s latest annual report paints a grim picture. Despite more than a decade of cost-control efforts, Medicare costs are expected to grow by more than 10 per cent annually during the next five years. Under current rules Medicare’s Hospital Insurance program (Part A) will face a shortfall of $47 billion by 2002. When the baby-boomers start retiring, the deficit will top $100 billion; it will explode to $1.4 trillion by 2035. Part B, which covers physician services, is in even worse shape. Funded largely through the Treasury, with a small portion paid by the elderly in monthly premiums, Part B is expected to triple in cost over the next ten years.