Medicare Cost Hike Plan for Affluent Is Assailed

WASHINGTON — The Senate Finance Committee’s precedent-setting move to make affluent Medicare recipients pay as much as $2,060 a year more for doctors’ services ignited a firestorm of protest Wednesday by advocates for the elderly.

The committee’s action, if approved by Congress, would impose the first income-related test for receiving benefits since the massive federal health program was created in 1965.

“This is a very dangerous precedent, a fundamental change in the program,” said Martin Corry, director of federal affairs for the American Assn. of Retired Persons, the largest of the seniors groups with 32 million members. “Medicare and Social Security are social insurance, where everybody pays in, the wealthy and poor alike, and everybody draws out benefits.”

The unexpected move could jeopardize a carefully arranged budget deal between President Clinton and GOP leaders that would generate Medicare savings primarily by trimming payments to hospitals, doctors and health maintenance organizations.

The Finance Committee proposal is a drastic departure from Medicare legislation approved last week by two House panels, which reduced spending without major policy changes.

Taking a much more politically daring approach, the Senate committee added controversial Medicare reform provisions that Clinton and Republican leaders would prefer to defer for future debate.

Clinton does not necessarily oppose charging wealthy seniors higher deductibles, White House officials said. But they said it was not necessary to achieve the $115 billion in Medicare savings needed to balance the budget.

“The principle itself may be useful in the future in another context as we deal with . . . longer-term problems related to entitlements, and particularly the Medicare trust fund,” said Press Secretary Mike McCurry.

But for now, McCurry said, “we’d prefer that they stick with the terms of the [balanced-budget] agreement. When it came to Medicare savings and the impact on beneficiaries, the terms were precise--and they did not call for income tests.”

In addition to making today’s affluent beneficiaries pay more, the Senate committee voted to restrict future benefits for the baby-boom generation by raising the eligibility age, now 65, to 67 in stages over 30 years.

Under current law, Medicare’s 38 million beneficiaries are required to pay the first $100 in doctors bills they incur each year. After the $100 deductible is satisfied, Medicare pays 80% of approved charges and the beneficiaries pay the remainder.

Under the Finance Committee plan, the annual deductible would jump to $540 for individuals with incomes of $50,000 a year, and $540 per person for couples with combined income of $75,000 or more.

The deductibles would increase with income according to a sliding scale, reaching a maximum of $2,160 per person for individuals making more than $100,000 and couples with income above $125,000.

The new charges would move the nation “toward a more fair health care system in which taxpayers are not asked to subsidize health care for those who do not need a subsidy,” said Sen. Bob Kerrey (D-Neb.), author of the amendment containing the income-based proposals.

But politically powerful seniors’ groups quickly denounced the committee bill, which now goes to the full Senate for consideration.

“It’s terrible; it’s a deal-breaker as far as seniors are concerned,” said Max Richtman, executive vice president of the 5-million-member National Committee to Preserve Social Security and Medicare.

By making the affluent pay more, the Finance Committee would be shifting Medicare toward a welfare-type program and possibly jeopardizing its political support, according to advocates for the elderly.

Only about 4% of Medicare’s 38 million beneficiaries have incomes of $50,000 or more, but they are considered one of the nation’s most active and influential voter groups.

An earlier effort to require affluent seniors to pay more for health care proved politically disastrous. In 1988, Congress voted to expand Medicare and finance the new benefits with special premiums paid by higher-income retirees. Their protests forced repeal of the law a year later, before its provisions could take effect.

Members of the Finance Committee said their intent is to send an unequivocal signal that Congress wants wealthier beneficiaries to begin bearing more of the burden to ensure Medicare’s long-term financial health. The Kerrey amendment was adopted by an 18-2 vote.

“The message is: Congress is serious about preserving the solvency of Medicare,” said Sen. Richard H. Bryan (D-Nev.) “Until now, we’ve taken a Band Aid approach. This is fundamental, structural and long-term reform.”

Sen. Charles E. Grassley (R-Iowa) agreed. “We all know that down the road, there has to be some means testing, and this is to set the stage for that, five to 10 years from now,” he said.

The oldest of the baby boomers will reach the age of eligibility in the year 2011.

Medicare, which pays doctor and hospital bills for those over 65 and the disabled, accounts for about $200 billion of the $1.5-trillion federal budget. Moreover, it is the fastest-growing program of any size.

The number of beneficiaries will grow to an estimated 70 million by 2030 as millions of baby boomers begin drawing benefits. The program’s financial future is in jeopardy because the boomers--those born in the years between 1946 and 1965--are the biggest generation in U.S. history.

Chairman William V. Roth Jr. (R-Del.) called the committee action “a movement toward equity.”

Discussions about requiring the affluent to pay more and raising the future eligibility age dominated a four-hour private meeting among senators and their staffs on Tuesday.

With both actions, we “send a powerful signal of the seriousness of this committee to save Medicare,” said Sen. Kent Conrad (D-N.D.).

Sen. Connie Mack (R-Fla.) said the votes were “the right things to do if we’re going to truly address the solvency issue.”

“We’re saving millions of dollars in the changes we’ve made,” concluded Sen. Phil Gramm (R-Texas).

Committee members said the votes foreshadow even more drastic measures as policymakers contemplate ways to stave off Medicare bankruptcy in the 21st century.

“We are prepared to make structural changes that are necessary” to preserve Medicare,” said Sen. Bob Graham (D-Fla.), who represents a big retiree population. “Both votes are real--and a signal of further changes to come.”

The proposed hike in the eligibility age would echo coming changes in Social Security. In 1983, Congress raised Social Security’s eligibility age for full benefits from 65 to 67, to be phased in over a transitional period from 2003 to 2027.

Analysts have warned, however, that raising the Medicare eligibility age will prolong the time that employers must pay for private health insurance for their workers. Some companies are likely to respond by cutting back on benefits or terminating coverage altogether, they contend.

Early retirements, buyouts and layoffs of older workers could increase the ranks of those without health insurance. People in their late 50s and 60s often find it prohibitively expensive to buy individual health insurance coverage.