Medicare "drifting towards disaster": U.S. official

WASHINGTON (Reuters) - Medicare is lurching toward disaster and it is too late for the Bush Administration and Congress to do anything about it, U.S. Health and Human Services Secretary Michael Leavitt said on Tuesday.

He said the next administration will have to act to stop rising costs and get control of the $400 billion federal health insurance plan for the elderly, which now covers 44 million people.

"Higher and higher costs are being borne by fewer and fewer people. Sooner or later, this formula implodes," Leavitt said in a speech to the right-leaning Heritage Foundation and American Enterprise Institute think-tanks.

"There is serious danger here," he added. "Medicare is drifting towards disaster."

Leavitt's speech echoes repeated warnings from other federal government officials who have noted that Medicare spending is projected to be 3.3 percent of gross domestic product in 2009.

A separate report released on Tuesday from the National Cancer Institute estimated that Medicare spent $21 billion on cancer alone between 1999 and 2003.

"The disaster is not inevitable. If we act now, we can change the outcome. In health care, the core problem is that costs are rising significantly faster than costs in the economy as a whole," Leavitt said.

But the administration of President George W. Bush and the current Congress are out of time, Leavitt said.

"So, given the strong possibility this won't get fixed in the next 266 days, I would like to add some general advice on the creation of a political construct for action and a general strategy to solve the problem," Leavitt said, saying he was speaking as a Medicare Trustee and not as a government official.

Leavitt said paying for each medical action separately is wasteful and "it often results in bad referral decisions, sloppy hand-offs, duplications, fraud, and poor quality of care. The result is inappropriate care and unnecessary cost."

Last week the Government Accountability Office blamed HHS in part for this, saying the agency had not used its powers to force hospitals to provide better care and less waste.

"It troubles me that this matter is not receiving more attention in the presidential candidates' discussions. The next president will have to deal with this in significant part," he said.

(Reporting by Maggie Fox, editing by Philip Barbara)