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By LARRY LIPMAN
The Atlanta Journal-Constitution
5/01/07

WASHINGTON, D.C. — For at least a decade, the trustees who monitor Social Security and Medicare have called for changes to ensure the programs' long-term financial health.

At least on Medicare, Congress may take action this year, but it's not likely to be what the Bush administration wants.

Without significant changes, the trustees warn, the payroll-financed trust fund for Medicare's hospital coverage will be exhausted in 12 years, and the fund for Social Security benefits in 34 years.

After that, both programs still would have enough tax money coming in to pay 75 percent or more of expected expenses.

Both programs could be made financially solvent by increasing payroll taxes: 1.95 percentage points for Social Security and 3.55 percentage points for Medicare. Together, that would raise payroll taxes from 15.3 percent to 20.8 percent.

That solution is considered politically impossible in the current atmosphere. But so is cutting benefits.

Few expect action on Social Security.

Even President Bush, who invested a considerable quantity of political capital in 2005 in an unsuccessful effort to restructure Social Security with private investment accounts, seems to have given up.

"I'll keep pushing, but I don't think it's going to happen," Bush said recently on PBS' "The Charlie Rose Show."

That makes Medicare the more likely playing field this year.

Its problems are both more immediate and more serious in the long run. Recently, a provision of the 2003 Medicare Modernization Act was triggered requiring the president and Congress to consider ways to reduce the share of Medicare funding that comes from general revenue.

Another impetus is that the Democrats who now control Congress have been chafing under the 2003 law's creation of a prescription drug benefit while prohibiting Medicare from bargaining with manufacturers.

J.D. Foster, a senior fellow at the conservative Heritage Foundation, said Democrats have a political interest in showing they can successfully tackle a major domestic issue now that they are in power.

"They didn't come to Washington to sit on their hands," Foster said. "If they want to act, this is an area where both sides can agree."

But Rep. Pete Stark (D-Calif.), chairman of the House Ways and Means health subcommittee, said he does not anticipate a sweeping Medicare reform aimed at definitively solving the program's long-term financial problems. Instead, he and others anticipate various adjustments that could prolong Medicare's solvency for a few years.

"One person's reform is another person's income cut, or another's benefit cut," Stark said. He said Congress must also consider "a lot of competing interests from beneficiaries, [health care] providers and taxpayers."

Bush has called for a nearly $40 billion reduction in the growth of payments to hospitals, nursing homes and other providers. He also would allow a scheduled 10 percent cut in doctors' fees to take place next year.

Congressional Democrats worry that cuts to providers would reduce beneficiaries' access to care. As for cutting doctor fees, both parties have balked at doing so in recent years, and both predict they will do so again.

For their part, Democrats are focusing on payments to private managed care plans in the Medicare Advantage program.

Several federal agencies have reported that Medicare Advantage payments are about 12 percent higher than those to providers under the traditional fee-for-service program.

Lowering the Medicare Advantage payments to the fee-for-service level would extend the hospital trust fund's solvency by about two years and would bring general revenue spending for Medicare below the 45 percent "trigger" for action under the 2003 law, Richard Foster, Medicare's chief actuary, told Stark's subcommittee last week.

The managed care industry and the Bush administration have been pushing back against any effort to cut Medicare Advantage payments. The Bush administration has repeatedly indicated it would prefer to see the program grow.

Another top priority for Democrats is removing the ban on Medicare negotiating with drug makers.