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Thursday, March 30, 2000
Contact: HCFA Press Office
(202) 690-6145


The Medicare Trustees today reported that the Hospital Insurance (HI) trust fund will remain solvent until the year 2023, based on the most probable economic and demographic assumptions. The projected depletion date has been extended by eight years from the forecast of 2015 made by the trustees last year. Today's estimate is the longest projection of solvency since 1974.

The Trustees credited the combination of the robust economy, as well as restrained expenditures due to HCFA's aggressive management of the system 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 by over three-fourths.

"This is a remarkable accomplishment, considering that when this Administration took office the Trust Fund was projected to be depleted in 1999. In the seven years since the Clinton Administration took office, we have extended the life of the Trust Fund by a full 24 years, and cut the long range actuarial deficit by 76 percent," said Health and Human Services Secretary Donna E. Shalala.

"But, we must keep working for a consensus on how to protect and modernize Medicare. We must keep the promise we made 35 years ago to America's senior citizens. And we must keep the promise in the future," she added.

"In an era of growing surpluses, the President has made the difficult decision to call for using these surpluses to improve our nation's fiscal position," said Treasury Secretary Lawrence Summers, managing trustee. "Fiscal discipline has contributed enormously to the current economic expansion. We must continue with fiscal discipline and use the benefits to strengthen Social Security and Medicare."

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 Hospital Insurance (HI) and Supplementary Medical Insurance (SMI) trust funds.

The report recommends that steps be taken to address the remaining long-range financial problems in the HI trust fund, building on strong steps taken in the Balanced Budget Act and other recent reforms. 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.

Although the SMI growth rates have moderated in recent years, the trustees' report again sounded concern over the rapid increases in long-term costs to the SMI trust fund. The SMI trust fund (Medicare Part B) helps pay for the services of physicians and other health care professionals, outpatient hospital services and home health and other services. The SMI program is financed mostly by general revenues of the government and by monthly premiums paid by beneficiaries. The 2000 premium is $45.50. The report calls on Congress to take action to control SMI costs as the baby boom generation approaches retirement.

The six trustees include, in addition to Secretaries Summers 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 DeParle, administrator of the Health Care Financing Administration, serves as secretary to the board of trustees.


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