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MEDICARE FUND OUTLOOK IMPROVES - JUST BARELY

The condition of the Medicare hospital trust fund has improved slightly, but it will still go bankrupt early in the next decade unless changes are made, the system's trustees reported Monday.

The Medicare fund, under the latest forecast, will run out in 2002 - one year later than the trustees predicted last April.The precarious state of the fund "illustrates again the need for reform of the health-care system to reduce the rate of growth in spending," Health and Human Services Secretary Donna E. Shalala said.

The separate Social Security old age and disability funds will last until 2030, one year later than the trustees estimated last year.

The report on the huge pension and disability program "reinforces the message that we must address the long-range issues facing Social Security, but we are not on the eve of a crisis," said Social Security Commissioner Shirley S. Chater.

Social Security is financed by a 6.2 percent payroll tax on employers and employees, and Medicare's hospital fund primarily by a 1.45 percent payroll tax.

The trustees - three Cabinet officers, two public trustees and Chater - warned that the hospital fund "will be able to pay benefits for only about seven years and is severely out of financial balance in the long range." They urged "prompt, effective and decisive action" to keep the insurance program for 36 million elderly or disabled workers in the black.

But they stopped short of offering Congress a prescription for Medicare reform. President Clinton had proposed major savings in Medicare last year as part of his universal health insurance plan, but when that failed and the Republicans took control of Congress, he shied away from cutting Medicare.

The trustees suggested establishing another advisory commission to provide advice on how to shore up Medicare.

House Speaker Newt Gingrich has said Medicare needs to be rethought from the ground up, and other GOP leaders have said they hope to save $150 billion or more over five years by slowing the program's growth.

The trustees looked at both the short- and long-term health of the programs stretching out over 75 years. The disability fund actually starts running a deficit in 2009, and its trust fund would be depleted in 2016. But the combined Social Security old age and disability funds would be solvent for 35 years, until 2030.