GOVERNMENTSurplus now, but red ink looming in Medicare forecastThe Bush administration, some lawmakers and Medicare's trustees are calling for a merger of the program's hospital and physician services segments.By Geri Aston, amednews staff. April 2, 2001. Washington -- Which is it: Medicare is in the best financial shape it's been in for years, or Medicare is in dire financial straits? According to the program's board of trustees, both statements are accurate. Medicare is in good financial condition now, but it's not expected to last, they say in their annual report. In response, Medicare trustees, Bush administration officials, lawmakers and analysts agreed on the need for reform. But there was little consensus about the magnitude of change necessary or its urgency. Medicare trustees last month announced that Medicare's hospital trust fund is not expected to be depleted until 2029 -- four years later than last year's prediction of 2025. Just six years ago, trustees said the fund would become insolvent next year. In addition, the fund had a $36 billion surplus last year. The hospital trust fund's rosier forecast is due to a number of factors: a strong economy, low health care cost increases, fiscal restraint imposed by the Balanced Budget Act of 1997, a shift of part of Medicare home health costs to part B, and federal efforts on Medicare fraud, trustees said. But the program faces a long-term crisis that will be caused by the retirement of the baby boomers, which will begin in 2010. The cost of Medicare part A, the hospital fund, and part B, the physician fund, are projected to quadruple over the next 75 years, said Health and Human Services Secretary Tommy Thompson, a Medicare trustee. Together, Medicare part A and part B spending is expected to grow from 2.2% of the gross domestic product today to 8.5% in 2075, he said.
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