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Prognosis Better for Medicare, Social Security

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  • By Amy Goldstein
    Washington Post Staff Writer
    Wednesday, March 31, 1999; Page A1

    The financial health of the Medicare and Social Security systems has improved dramatically, according to a new government forecast that could undermine the chances that Congress will reform either of the nation's main retirement programs this year.

    The annual report, released by the Clinton administration yesterday, shows that Medicare, in particular, rests on far more solid fiscal ground than previously suspected. The fund that pays hospital bills is expected to last for 16 more years, seven years longer than predicted just a year ago.

    The prognosis for Social Security, meanwhile, brightened for the second consecutive year, marking the biggest two-year improvement in the program's history apart from times when Congress had stepped in to keep the retirement system afloat. The program will be able to cover its expenses until 2034, two years longer than predicted last year, according to the new report.

    The improved outlook for Social Security and Medicare, largely a result of the strong economy, carries significant political ramifications at a time when both President Clinton and Congress's Republican leaders have pledged to make reforms of the programs their central domestic policy goals this year. While Democrats and Republicans alike hailed the forecast as welcome news, policy experts on Capitol Hill and beyond cautioned that it could have the paradoxical effect of slowing the momentum for change.

    "I think it probably will guarantee that we will do nothing this year," said Rep. Charles W. Stenholm (D-Tex.), a longtime budget expert and leading congressional advocate of Social Security reforms.

    The new forecast does not suggest any reduction in the financial pressures the two programs eventually will face next century, as the government begins absorbing the health care and retirement expenses of the 77 million-strong baby boom generation. But the forecast pushes those problems slightly further into the future, just as the two political parties have started to seriously squabble -- and to display internal divisions -- over which approach to reform is best.

    Apparently mindful that yesterday's news could dampen their drive for reform, Clinton and several of his Cabinet members immediately renewed their prodding of Congress to fix the programs this year.

    "We should not be lulled into thinking that nothing more needs to be done," the president said at a Rose Garden ceremony. He repeated his call for Congress to devote part of future budget surpluses to Medicare and to begin to help elderly patients pay for prescription drugs, although he once again did not lay out specific proposals for restructuring the two programs.

    Several leading congressional Republicans showed no interest in backing away from an issue that, polls suggest, has visceral appeal to the American public. "It is important that this not be used as an excuse to leave . . . reform for another day," said Rep. E. Clay Shaw Jr. (Fla.), chairman of the House Ways and Means Social Security subcommittee.

    Nevertheless, others on Capitol Hill said the prospects for major reform this year are fading. "Since these are very difficult programs to deal with, there will be a large number of members who will say, 'Well, we don't need to rush as quickly to come to an agreement,' " said G. William Hoagland, staff director of the Senate Budget Committee.

    Such predictions were echoed yesterday by outside policy experts -- liberal and conservative, fans and foes of major overhauls of the two programs.

    "I'm afraid [the new forecast] will just postpone our day of reckoning," said Gail Wilensky, a former director of the federal agency that runs Medicare.

    "Our political system certainly runs at higher gear when a crisis is perceived. This takes away some of the notion of a crisis," said Urban Institute economist Marilyn Moon, one of two public members of the Social Security and Medicare board of trustees, which prepared the annual report.

    Social Security is the nation's largest social program, paying monthly checks to about 44 million Americans who are retired, disabled or the survivors of workers who died prematurely. The program is funded through a 12.4 percent payroll tax, which is shared by workers and their employers.

    According to the new analysis, the program will begin to spend more money than it takes in by 2014, one year later than previously expected, and will be unable to cover all its expenses 20 years after that.

    Medicare, the government's second-largest social program, helps to pay the medical bills of about 39 million Americans. The prediction that the program would be able to pay its hospital bills until 2015 startled government officials and independent health economists alike. Just this month, the Congressional Budget Office -- traditionally less conservative than the program's trustees -- predicted that Medicare's hospital fund would stay solvent until 2012.

    At a news conference at the Treasury Department yesterday on the release of the trustees' report, several members of Clinton's Cabinet said both programs have benefited in the past year from the nation's strong economy. That prosperity is helpful because more money from payroll taxes flows into the programs in times of low unemployment and high wages.

    In addition, Health and Human Services Secretary Donna E. Shalala said that Medicare had been shored up by budget decisions two years ago that have limited payments to doctors and hospitals that treat elderly patients, as well as by recent government efforts to cut down on improper payments to health providers.

    Staff writer Charles Babington contributed to this report.

    © Copyright 1999 The Washington Post Company

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