When the trustees of the Medicare trust fund released their annual report in April, the Republican leaders in Congress were shocked--shocked!--to learn that the fund is projected to run out of money in 2002, just seven years from now. This reaction was odd. The trustees issue a report every year, and never before has any leading politician, Republican or Democrat, expressed so much panic. This year's report actually showed an improvement over last year's, which projected that the trust fund would go bust in 2001. Yet House Speaker Newt Gingrich and other Republicans suddenly declared with one voice that immediate steps were necessary to "save Medicare."
The reason, of course, was spin. The Republicans are planning deep cuts from projected Medicare spending as part of the effort to balance the budget. And the amount they're hoping to squeeze out of Medicare--$270 billion over seven years--is embarrassingly close to the amount--$245 billion--they're planning in tax cuts, mainly for the affluent. Naturally, they would prefer to portray their Medicare cuts as an effort to "save Medicare." But $270 billion is double what would be needed just to stabilize the trust fund.
President Clinton's own version of a balanced budget calls for $128 billion of Medicare savings in the first seven years. So there is now bipartisan agreement that Medicare will be trimmed. The only questions are how much to trim and how to do it.
The next move is up to the Republicans, who are expected to unveil the details of their plan sometime after Labor Day. Senate majority leader Bob Dole says the reform has to be "done" by Sept. 22. That leaves three weeks for the public to assess and debate the most radical change in the system since its creation in 1965. (Republicans last year criticized the Clinton Administration for producing in secret a health-care reform plan that was publicly debated for 10 months.) To meet Dole's schedule, we will all have to be marvels of a well-informed citizenry. The propaganda coming from both Republicans and Democrats so far hasn't helped.
The first thing to get straight is this business about a "trust fund.'' It is an accounting myth. Like the trust fund for Social Security, the Medicare fund is "invested" in special government securities that are not counted as part of the national debt. Medicare's income and outlays are figured into each year's budget as if the trust fund didn't exist. Thus, as the government figures it, each dollar pruned from Medicare magically does double duty: it both saves a dollar for the trust fund and reduces the current year's deficit by a dollar. Furthermore, like the Social Security trust fund, the Medicare fund receives money from one group of people (current workers) and pays out to a different group (retirees). And, like Social Security, Medicare pays current beneficiaries far more than they ever put in.