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Medicare deficit looming

Posted Feb. 08, 2009, at 9:34 p.m.

AUGUSTA, Maine — Most Maine seniors depend on the federal Medicare program to pay for part of their health care. Former Gov. Angus King, who served as vice-chairman of a national commission that studied the program, says Congress needs to shore up the program that could run short of funding as early as this year.

“Medicare is part of the Social Security system,” King said in an interview. “A huge expansion was passed five years ago, the prescription drug benefit, without a dime of funding. Medicare goes cash negative in the next year or so — in other words it will be spending more than it takes in from its underlying tax. That’s where the big problem is going to be, and that’s what no one is paying much attention to right now.”

Medicare and Social Security are funded from a payroll tax, paid by both workers and employers. While Social Security funds are adequate, King says the increasing costs of health care and the increasing number of seniors are putting great pressure on the system.

Medicare accounts for more than one-fifth of all health care spending in the nation and totaled $426 billion in 2007.

“It’s a big issue that needs to be addressed by Congress, even with all the other huge issues they are facing,” he said.

Sen. Olympia Snowe, R-Maine, agreed with King. She serves on the Senate Finance Committee that has jurisdiction over Medicaid, Medicare and Social Security. She said there are several proposals under consideration to improve health care overall that would help with the Medicare problem.

“For example, there is a study that says if we fully deploy health technology so all records are electronic, it would save the health care system $500 billion,” she said. “That would save money for Medicaid and Medicare.”

Snowe said many of the cost issues plaguing Medicare are also problems for the entire health care system. She said any improvements to the system will help the problems facing Medicare.

“But there is no question we are facing a serious problem that we will need to resolve,” she said. “It is a looming issue that we will have to address.”

Maine’s Democratic 1st District Rep. Chellie Pingree said Congress will have to deal with the Medicare problem and agreed with Snowe that at least part of the solution will be improving the nation’s health care system.

“I think that President Obama has made it clear that we need a new national health care system and that it will be a priority of his administration,” she said. “I think creating a better national system will help solve the problems we are facing in Medicare.”

Pingree said she wants to be involved with the effort to create a new health care system as she was involved in health issues when she served in the Maine Legislature.

“I think we have the opportunity to take a fresh look at what we are doing and what we can do better,” she said.

Sen. Susan Collins, R-Maine, said the country is facing a “serious” challenge with rising health care costs affecting many federal budget areas, not just Medicare, as well as the budgets of individuals and families.

“Without significant reform, our spending on these programs is on an unsustainable path, and our aging population only exacerbates the problem,” Collins said. “While the attention of Congress and the new administration is currently focused on the economic crisis, the looming Medicare shortfall is a new crisis in the making that cannot be ignored.”

Second District Rep. Mike Michaud, a Democrat, said he is very concerned about both the short-term fiscal impact and the long-term problems posed by Medicare. He and other members of the conservative Blue Dog caucus plan to meet with President Obama on the issue later this week.

“The solvency of Medicare is something that we cannot continue to ignore,” he said. “Kicking the ball down the field each year is only going to make our fiscal challenges worse.”

Michaud said one reason he bucked his party leaders last month and voted against the rules for writing this year’s federal budget was the elimination of the requirement that a plan be developed to address the long-term funding of entitlement programs, such as Medicare.

“The Obama administration has signaled that they want to get costly entitlement spending under control, but it is going to require reforms and some tough decisions,” Michaud said. “I’m disappointed that leaders on Capitol Hill don’t seem as committed.”

King acknowledges Congress has a “full plate” with all of the financial issues facing the nation, but said the potential size of the Medicare problem is also a serious financial problem for the nation. He said the federal budget deficit is already huge and growing and adding what was once unthinkable sums to the national debt.

“The question is: How big is our kids’ credit card?” he said.

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