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Prescription Drug Update Quick action on a Medicare prescription drug benefit is in doubt. Arguing that Medicare is operating in a financial deficit, while an economic downturn may mean surpluses may not materialize, a number of government experts are building a case against adding a new prescription drug benefit until Medicare is overhauled. This despite a substantial increase in the Medicare Trust Fund surplus. In March, the Medicare Trustees released their 2001 report which found that the Part A Hospital Insurance and the Part B Supplementary Medical Insurance Trust Funds are `adequately financed.` The Part A Trust Fund gained one more year, until 2016, before Medicare tax revenues begin to fall short of expected costs. In testimony before the House and Senate, however, a witness charged that those projections are misleading because of the two-part nature of Medicare financing. Part A Medicare is financed through surplus Medicare payroll taxes, but the Part B portion is financed primarily from general federal revenues that cover about 75% of costs with the rest covered by monthly premiums paid by enrollees. The Medicare Trustees report they say, does not take into account the more rapid growth rate of Medicare Part B. According to Congressional Budget Office Director Dan Crippen, the discrepancy between total Medicare expenditures, including both those from general revenues and `dedicated revenues` (from the Trust Fund) is expected to be $64 billion in 2001, or about 26% of Medicare`s total outlays. Because of Medicare`s fragile finances, Gail Wilensky, a former Administrator of the Health Care Financing Administration who acted as Bush`s campaign advisor on Medicare, has urged caution on adding a prescription drug benefit because of the difficulty of correctly estimating the cost. Recently the Congressional Budget Office boosted its forecasts of drug spending to about 13% per year for the next decade, instead of the 11% projected less than one year ago. Wilensky stated that, `This means that the estimated cost of prescription drug bills already proposed, including the President`s, is too low.` Sources: `Prescription Drugs and Medicare Financing,` Dan Crippen, Director of The Congressional Budget Office before the Senate Finance Committee, March 22, 2001. `The Financial Outlook for Medicare,` Richard Foster, Chief Actuary, Health Care Financing Administration, before the Senate Finance Committee, March 22, 2001. `Department of Health and Human Services FY2002 Budget Priorities,` Gail R. Wilensky, Ph.D., John M. Oil Senior Fellow, Project HOPE, House Committee on the Budget, March 7, 2001. To read a related story on our website, click on the headline below: `Congress Must Move Forward on Prescription Drug Plans`
This article first appeared in Volume 6, Issue 7 of "The Social Security and Medicare Advisor" newsletter (June/2001). To receive future editions of "The Advisor" in its special, free e-mail version, please click here.
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