U.S. Chamber Applauds End of 'Gimmicks' in Medicare Report

WASHINGTON, D.C. — The United States Chamber of Commerce applauded today's Medicare Trustees' report on program solvency for finally eliminating the reporting gimmicks that hid the program's true financial picture.

"Medicare is too important to too many people to play politics with the program's finances," said Kate Sullivan, Chamber director of health care policy. "Medicare must take care of our most vulnerable citizens' health care needs, not Congress's short-term budget needs."

The 2002 Medicare Trustees' Report for the first time issued a combined report on the financial health of both the Medicare "Part A" and "Part B" trust funds. "Part A" (the Hospital Insurance Trust Fund) is funded through payroll taxes on all earned income, with an equal match by employers. "Part B" (the Supplementary Medical Insurance Fund) pays for doctor- and outpatient care and is funded largely through general revenues, with beneficiaries contributing about one-quarter of the cost through monthly premiums. Like all health plans, Medicare has experienced rapid growth in recent years, and Part B exploded 12% last year alone.

"Part B's long-time segregation from the part of Medicare that is financed by payroll taxes has masked its real cost to taxpayers," stated Sullivan. "In fact, 6% of total federal income taxes in 2001 went into this part of Medicare, with another 2.9% going into the Hospital Insurance Fund."

Medicare trustees expect that if current trends continue, 23% of total income taxes in 2070 would go to this part of Medicare, and the Hospital Insurance payroll tax would have to increase 60%.

"These 'total picture' projections highlight the need for comprehensive reform to ensure Medicare benefits are there for tomorrow's retirees," said Sullivan. "Gaping holes in this critical safety net must be repaired and its financing structure made sound before costly new benefits are added on."

The U.S. Chamber of Commerce is the world's largest business federation representing more than three million businesses and organizations of every size, sector and region.

# # #

02-54