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News of the Day ... In Perspective


Medicare trustees issue unprecedented warning

For the first time, Medicare trustees have issued the warning required by the bill that created Medicare Part D. They are projecting that Medicare will rely on general revenues, rather than payroll taxes and premiums, for more than 45 percent of its revenue in consecutive years.

Absent legislation, President Bush will have to propose ways to reduce reliance on the federal treasury to less than 45 percent. His most recent budget has recommended a 0.4 percent across-the-board cut for every Medicare provider when the 45 percent mark is passed (Kevin Freking, Associated Press 4/20/07).

The actual outlook is probably worse than the trustees’ projection because the projections assume that Medicare will follow the current law and slash payments to doctors. Congress has blocked those reductions for the past 4 years.

On the optimistic side, hospital admissions were down, but this is thought to be a one-time random fluctuation. The cost of the prescription drug benefit has also been less than expected.

David Sloane, director of government relations at the American Association of Retired Persons (AARP), said that Medicare’s problems could not be solved without addressing those of the entire medical system (New York Times 4/24/07).

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