An advisory government panel warned Friday that Medicare is in a "precarious" financial position and suggested a series of changes that would reduce benefits and increase costs.
"Medicare faces serious financing problems, particularly early in the next century," concluded a 191-page report by the health technical panel of the Advisory Council on Social Security."The retirement of the baby boomers - particularly between 2010 and 2030 - and the subsequent movement of the baby boom into advanced old age will place a growing demand on the national resources needed to finance health care for the elderly."
Medicare spending was $108.9 billion, or 1.97 percent of the nation's gross national product last year, the panel said. By the year 2000, Medicare will account for 3.01 percent of GNP - a 50 percent increase. By the year 2010 it will be 4.06 percent, twice the current level, and by 2020 it will be 5.15 percent, more than 21/2 times the current share.
If Congress continues to require beneficiaries to assume 25 percent of the cost of Medicare's Part B program - covering doctors and related bills - premiums would increase from $29.90 per month this year ($28.60 in 1990) to $82.50 by the year 2000, $188.50 by 2010 and $310.50 by 2020. It would reach an astounding $2,572.80 a month by the year 2060 if no changes were made.
To offset the growth in Medicare and place it on a sounder financial footing, the technical panel offered a series of options that would change the character of the system. The advisory council took no action on the options but is expected to recommend some changes in the Medicare program when it reports later this year to Health and Human Services Secretary Louis W. Sullivan.
Changes suggested by the panel include:
- Raising Medicare taxes either by eliminating the cap on wages subject to Medicare taxes - the cap was more than doubled to $125,000 in last year's budget agreement - by increasing the tax rate, now set at 1.45 percent, or by taxing all or part of employer-provided health insurance.
- Raising the Medicare eligibilty age to match changes in the Social Security eligibility age. Full benefits for Social Security, now paid to retirees at age 65, will be delayed until age 66 for those born after 1938 and from 66 to 67 for those born after 1955.
- Raising the Medicare deductible for physician care and merging the hospital and physician portions of the program. The deductible increased from $75 to $100 in last year's budget bill.
- Give Medicare beneficiaries more choices over the type of coverage they wish to purchase. Choices would range from less coverage of treatment for terminally ill patients to full coverage of high-tech life-prolonging care. Beneficiaries would be able to reassess and change their choices on a periodic basis.