Economic Downturn Could Hasten Medicare Part A Insolvency

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The economic downturn could hasten insolvency of the Medicare Part A trust fund by one year to three years, Richard Foster, chief actuary for CMS, said on Monday, the AP/Boston Globe reports.

Medicare trustees earlier this year estimated that the trust fund, used to pay for hospital and nursing home care for Medicare beneficiaries, would be insolvent by 2019. However, Foster said that the economy this year likely will generate less revenue through payroll taxes than anticipated.

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Foster said, "Right now, we know that we're in the start of the recession. We don't yet know how severe it might be," adding, "We did a very, very rough estimate suggesting that because of the recession," Medicare Part A insolvency could occur between 2016 and 2018.

According to the AP/Globe, once the Part A trust fund is exhausted, the federal government will continue to pay for inpatient hospital care, nursing home care, hospice and home health. However, the government initially would have enough money to cover only 78% of estimated costs.

HHS Secretary Mike Leavitt said, "The more you anticipate the problem, the better chance you have of averting disaster," adding, "That's why the trustees here are frantically trying to get people's attention to say you have to start now" (Freking, AP/Boston Globe, 12/1).

Reprinted with permission from kaisernetwork.org. You can view the entire Kaiser Daily Health Policy Report, search the archives, and sign up for email delivery at kaisernetwork.org/email . The Kaiser Daily Health Policy Report is published for kaisernetwork.org, a free service of The Henry J. Kaiser Family Foundation. © 2007 Advisory Board Company and Kaiser Family Foundation. All rights reserved.

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