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Date: Tuesday, April 28, 1998   
Contact:  HCFA Press Office (202) 690-6145


The Medicare Trustees today reported that, because of legislative changes in the Balanced Budget Act of 1997, the Hospital Insurance trust fund will remain solvent until the year 2008, based on the most probable economic and demographic assumptions. The projected depletion date has been extended from the forecast of 2001 made by the trustees last year.

The trustees credited the combination of restrained expenditures and structural reforms accomplished by the Balanced Budget Act for extending the life of the trust fund, and cutting the projected 75-year actuarial deficit in half. The Balanced Budget Act also created the National Bipartisan Commission on the Future of Medicare, which is charged with developing effective solutions to the long-term financing problems. The commission held its first meeting on March 5, and is due to issue a report in 1999.

"The balanced budget agreement demonstrated that when we work together in a bipartisan fashion, we can solve our problems. By passing the Balanced Budget Act, we modernized the Medicare program, we cut spending and we won the breathing room we need. Now, we must all pledge to work with the Medicare Commission to build on that bipartisan achievement, and bring lasting stability to the Medicare trust fund," said HHS Secretary Donna E. Shalala.

"These outcomes are a direct result of the enactment of the Balanced Budget Act and the recent strong performance of the economy," said Treasury Secretary Robert E. Rubin, managing trustee. "The health of both the Social Security and Medicare trust funds is important for the millions of Americans who depend on these programs today, and for the millions who will depend on them in the future. Preserving and modernizing Social Security and Medicare is not a partisan issue. We will be able to construct acceptable solutions to the longer term challenges of both programs only if we join together and act on a bipartisan basis."

The new solvency projection was made by the trustees today, and is based on the assumptions contained in today's report. The Medicare Trustees issue annual reports to Congress on the HI and Supplementary Medical Insurance (SMI) trust funds.

The trustees' report again sounded concern over the rapid increases in costs to the SMI trust fund. The report urges the Medicare commission to recommend near-term solutions to control SMI costs, and calls on Congress to develop and enact legislation as the baby boom generation approaches retirement.

Medicare hospital insurance helps pay for care given by hospitals, skilled nursing facilities, hospices, and home health agencies. The HI trust fund (Medicare Part A) is financed mainly by the Medicare portion of the Social Security payroll tax. The Medicare payroll tax rate of 2.9 percent consists of equal contributions of 1.45 percent from employers and employees.

The SMI trust fund (Medicare Part B) helps pay for the services of physicians and other health care professionals, outpatient services, independent laboratory services, and durable medical equipment. The SMI program is financed mostly by general revenues of the government and by monthly premiums paid by beneficiaries. The 1998 premium is $43.80 a month, the same as the premium in 1997.

The six trustees include, in addition to Secretaries Rubin and Shalala, two other trustees who serve automatically because of their government positions: Labor Secretary Alexis Herman and Social Security Commissioner Kenneth Apfel.

Two other members, the public trustees, are appointed by the President with Senate confirmation. The public trustees are Stephen G. Kellison and Marilyn Moon. They serve four-year terms and represent the general public. Nancy-Ann Min DeParle, administrator of the Health Care Financing Administration, serves as secretary to the board of trustees.


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