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Published: Monday, 4/11/2005

The Medicare morass

All the attention paid to President Bush's plan to overhaul Social Security has obscured even more serious fiscal problems shadowing the Medicare program.

This is true for several reasons, not the least of which is the looming retirement of some 70 million Baby Boomers, who will be relying on Medicare to pay their health-care bills after they turn 65.

A recent report from Medicare and Social Security trustees pointed out that the health-care costs Medicare will be called on to absorb are rising at a faster rate than wages, to which Social Security payments are indexed.

In addition, the prescription drug benefit approved by Congress to begin next year under Medicare will be much more expensive than expected. To pay for it, the federal government is reaching down into the pockets of the states, many of which, including Ohio and Michigan, have serious budget problems of their own.

Congress, in adopting the drug benefit, set up a mechanism that was supposed to save the states $7.9 billion by relieving them of drug costs they now pay for poor people under the Medicaid program.

But the states are required to pay much of what they save to the federal government to defray the cost of the new Medicare benefit.

For Ohio, the cost in 2007 will exceed the savings by $55.7 million. Gov. Bob Taft has proposed dealing with the problem by cutting off vision and dental care services for 800,000 low-income adults.

"This is a sea change in the state-federal relationship," Trudi Matthews, chief health policy analyst for the Council of State Governments, told the New York Times. "Money generally flows down from Washington to the states but in this case it's flowing upward, from the states to the federal government."

Another state official termed it "a dangerous precedent."

Taking money from the states for a federal program appears to be part and parcel of the Bush Administration's strategy to shift the burden of paying for its record budget deficits, fueled by the war in Iraq. Likewise, in Ohio, the Republican-led General Assembly is trying to erase a budget deficit by reducing the amount of tax revenue it returns to cities, counties, villages, townships, and libraries.

The bottom line, of course, is that neither problem is solved, just shifted from one branch of government to a lower branch, where officials are forced either to cut services or raise taxes.

That's the fine print. The more immediate problem is that Medicare's hospital insurance trust fund is expected to be depleted in 2020 and the overall cost of the program will exceed that of Social Security in 2024.

This dreary forecast underscores the need for prompt action to shore up Social Security, preferably by raising the $90,000 salary cap on withholding.

Only then will Congress and the administration be able to focus effectively on the coming Medicare morass.



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