Bankruptcy of Part of Medicare Feared : Benefits: Social Security board says that hospital trust fund could go broke in 2005. It calls for curtailing rapid growth of doctors’ bills.

The seemingly uncontrollable rise in medical costs has doubled Medicare’s spending for doctor bills in just five years and will drive the separate hospital trust fund into bankruptcy in 2005, an alarmed Social Security Board of Trustees said Friday.

The spiral of spending “shows little or no sign of significantly abating,” the trustees said in their annual report on the health of Medicare and Social Security, the biggest and most far-reaching government benefit programs.

Congress should strive to “curtail the rapid growth” of outlays for doctors, the report said, to prevent severe financial problems for the Medicare system, which covers the cost of health care for the elderly.

Congress already has tried freezing fees, reducing payments on specific procedures such as cataract surgery and encouraging Medicare beneficiaries to enroll in special health maintenance organizations aimed at controlling expenditures. But these efforts have had little impact on the overall bill for medical services for the 33 million Medicare recipients.

The Social Security retirement program, in sharp contrast, is in generally good shape, the trustees said. The combined retirement and disability funds will not run out of money until the year 2041, when millions of members of the baby boom generation will be in their 80s and 90s, the trustees said.

The disability trust fund will have financial problems as the number of persons entitled to benefits climbs rapidly, but the problem can be easily solved by shifting some of the retirement fund surplus into the disability category, the trustees said.

However, there is no easy solution to the problem of medical costs, the trustees said, using blunt language rarely found in the normally bland recital of statistics that make up the annual report. Tough steps to control costs in the hospital fund “will be needed very soon in order to avoid the need for potentially precipitous changes later,” the report said.

Health and Human Services Secretary Louis W. Sullivan said that the report “underlines the urgency of our task in containing health care costs and spending our health care dollars more effectively.”

Sullivan has been emphasizing individual behavior and responsibility for better health practices. During an era of budget austerity, the Bush Administration is eager to avoid any new programs that could add to medical outlays, which already consume 12% of the nation’s total output of goods and services.

The hospital insurance fund, financed by payroll taxes on 138 million workers and their employers, provides coverage for 30 million persons over the age of 65 and 3 million disabled Americans of all ages. The tax is 1.45% of earnings on income up to $125,000.

The hospital insurance fund, called Part A of Medicare, spent $66.7 billion in fiscal 1990.

Currently, there are four workers paying taxes for each person enrolled in the Medicare program. By the middle of the next century, there will be just two workers providing the taxes that pay the medical bills for each beneficiary.

However, spending is rising so rapidly that the hospital trust fund will be exhausted even sooner, in the year 2005, if the U.S. economy performs at an intermediate level, according to the report.

“Promising steps” have been taken to curtail the growth in hospital spending, including Medicare’s system of paying a fixed fee for various categories of treatment, the trustees noted. But the campaign to control the growth in costs must be even more determined, the report said.

“Efforts focused on improving the efficiency and reducing the costs of the health care delivery system need to be continued, in close combination with mechanisms that will assure that the quality of health care is not adversely affected,” the report said.

Part B of Medicare covers doctor bills. About 25% of the cost is covered by the monthly insurance premiums paid by Medicare beneficiaries, $29.90 a month this year. The vast bulk of the program, 75% of costs, is paid from general tax revenues and has been a fast growing item in the federal budget.

Spending reached $43 billion in fiscal 1990. The cost of the program has grown 37% faster than the general economy during the last five years, despite numerous detailed efforts by Congress to control outlays.

The trustees exhort Congress to “continue to work to curtail the rapid growth in the cost of the . . . program,” the report said.

The trustees disturbing report illustrates the problem of “skyrocketing health care costs throughout our entire society,” said the 32-million-member American Assn. of Retired Persons, which represents persons 50 and older. “AARP renews its call for comprehensive reform of our nation’s health care system for the benefit of all.”

The trustees who prepared the report were Secretary Sullivan, Treasury Secretary Nicholas F. Brady, Labor Secretary Lynn Martin, and two public members, Stanford G. Ross, a former Social Security commissioner, and David M. Walker, a former deputy assistant secretary of labor.