Discussing health care reform with reporters, Iowa Sen. Charles Grassley pointed to an annual report released Wednesday on Medicare’s financial situation to argue against a government-run health system.

But Robert Reich, secretary of labor under President Bill Clinton and professor at the University of California at Berkeley, says Medicare’s fiscal problems are actually a big reason to support a public option for health insurance.

Medicare provides health insurance to about 45 million people, mostly senior citizens. The impending eligibility of Baby Boomers, who can start joining Medicare in 2011, coupled with an unrelenting increase in health care costs, have heightened concerns in recent years about the program’s long-term viability.

Wednesday’s report issued by the programs’ trustees predicts Medicare’s hospital fund will be exhausted by 2017, two years earlier than predicted a year ago.

“Medicare’s financial problems underscore how it doesn’t make sense to create a government-run health insurance plan, which is very much a controversial part of our health care reform debate,” Grassley said. “We can’t afford the public plan that we already have, and if we create a government-run health care plan that’s unaffordable and unsustainable, it isn’t going to be any good for anyone.”

Reich disagrees, saying fixing the rate of growth of medical costs is how you solve the Medicare problem, and to do that the country must have a public option when it comes to choosing insurance plans.

“Medicare is a terrible [problem], but the problem is not really Medicare; it’s quickly rising health-care costs,” Reich said on his blog. “Look more closely and the real problem isn’t even health-care costs; it’s a system that pushes up costs by rewarding inefficiency, causing unbelievable waste, pushing over-medication, providing inadequate prevention, over-using emergency rooms because many uninsured people can’t afford regular doctor checkups, and spending billions on advertising and marketing seeking to enroll healthy people and avoid sick ones.”

The government can use its bargaining power with drug companies and suppliers of medical services to reduce prices, Reich said.

“And, as I’ve noted, keep pressure on private insurers to trim costs yet provide effective medical outcomes,” he said.