MEDICARE TRUSTEES' REPORT SHOWS UNPRECEDENTED PROGRESS UNDER THE CLINTON-GORE ADMINISTRATION -- BUT MAJOR CHALLENGES REMAIN
March 30, 2000 – revised April, 2000
Today, the Medicare Trustees projected that the life of the Medicare Trust Fund has been extended until 2025 – 10 years longer than had been projected last year. This is a historic change from 1993 when the President came into office and received the Trustees report projecting that Medicare would become insolvent in 1999. In welcoming this news, the President highlighted the Administration's stewardship of Medicare which has resulted in the longest Medicare Trust Fund solvency in a quarter century and premiums that are nearly 20 percent lower today than projected in 1993. He pointed out, however, that Medicare still faces daunting demographic and health challenges. It is projected to become insolvent in the middle of the retirement of the baby boom generation. And, unlike virtually every private health plan, Medicare still does not cover outpatient prescription drugs. The President also emphasized his comprehensive plan to make Medicare more competitive and efficient; modernize its benefits including adding a voluntary prescription drug benefit; and dedicating part of the on-budget surplus to meeting the future financial shortfall. Based on preliminary analysis, these policies are projected to extend the life of Medicare beyond 2030. The President's Medicare plan is part of his fiscally disciplined framework to strengthen Social Security, invest in key priorities, and pay off the debt held by the public by 2013.
MEDICARE IS MUCH STRONGER BUT FACES UNPRECEDENTED DEMOGRAPHIC CHALLENGES
- Best Solvency Status in a Quarter Century. When the President came into office, the Medicare program was projected by the Trustees to go bankrupt by 1999. The Medicare Trustees project that the life of the Medicare Trust Fund has been extended by 10 years, to 2025, and that its actuarial deficit – a measure of long-run solvency – has been reduced to less than 1.21 percent of taxable payroll, a more than 76 percent decline from 1993. Today's announcement means Medicare is now in the soundest shape it has been since at least 1975.
- Medicare Premiums for a Couple Are $200 Lower This Year Than They Were Estimated to Be in the 1993 Trustees' Projections. The President's leadership has not only resulted in an improved Trust Fund, but lower monthly premiums for seniors. In 1993, the projected Part B premium for 2000 was $54.50. Today, it is actually $45.50 per month. This is $9 less per month – a 17 percent decrease from the Trustees' 1993 projections. For an elderly couple, this is an annual savings of over $200.
- Improved Financial Status of Medicare Reflects the President's Economic and Medicare Program Management Policies. The President's leadership in strengthening the economy and constraining inflation, as well as Medicare's success in modernizing payments and combating fraud and waste, has resulted in a strong and fiscally stable program. The improvements in the Trustees' Report confirm the soundness of the Administration's economic and management policies.
- Major Health and Demographic Challenges Remain. While significant, the Administration's recent success in extending the life of the Medicare Trust Fund does not meet the full challenges facing Medicare. The Trustees' Report projects that enrollment in Medicare will double from 39 million in 1999 to 81 million by 2035. Equally important, Medicare's benefits have not kept pace with modern medicine. Medicare does not cover prescription drugs and, as a result, 3 in 5 Medicare beneficiaries lack dependable prescription drug coverage. Most of these beneficiaries who need prescription drug coverage are in the middle class, with income between 150 and 400 percent of poverty ($12,525 to $33,400 for a single elderly person).
PRESIDENT'S PLAN TO STRENGTHEN AND MODERNIZE MEDICARE. The President's FY2001 budget dedicates $432 billion over 10 years – over half of the on-budget surplus – to strengthen and modernize Medicare to prepare it for the health, demographic, and financing challenges of the 21st Century, extending its solvency to at least 2030. This plan would:
- Make Medicare more efficient and competitive. The President's plan adds price competition and successful private-sector management tools to Medicare. These policies manage cost growth and allow flexibility to adopt innovative private practices to improve quality and efficiency.
- Modernize benefits, including adding a prescription drug benefit. The President's plan creates a voluntary prescription drug benefit that is accessible and affordable for all beneficiaries, and is managed competitively and efficiently. It provides high-quality, needed medications. It also creates a reserve fund that permits the Administration to work with Congress to design protections for catastrophic drug costs. If no consensus emerges, the reserve would be used for debt reduction.
- Dedicate non-Social Security surplus to Medicare. Without new financing, excessive and unsupportable provider payment cuts or beneficiary cost sharing increases would be needed. The President proposes to dedicate $299 billion over 10 years from the non-Social Security surplus to the Medicare Trust Fund, improving its financing and reducing debt.
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