Proposed Trims Hit Health Care, Programs for Poor

President Reagan’s budget calls for cutbacks in a broad range of government programs for poor and middle-income Americans, with higher bills proposed for new recipients of Medicare, fewer grants for college students and reduced spending for poor people’s medical and heating bills.

Despite proposed reductions of $18.7 billion for domestic outlays, the Administration picked several highly visible areas for expanded spending. More money would go for AIDS research, more air traffic controllers and safety inspectors would be hired and $750 million would be provided to assist workers hit by lengthy layoffs.

The budget submitted Monday faces a hostile reception in Congress, where Democrats now control both chambers. Many of the Administration’s proposals have been included in previous budgets, only to be rebuffed by Congress.

“I know of no reason why they would be more successful now,” said Sen. Lawton Chiles (D-Fla.), chairman of the Budget Committee.

The biggest cutbacks in domestic social programs came during the first year of the Reagan presidency. Since then, there has been a virtual stalemate, with the President asking for more cuts and Congress voting for modest increases.

‘Hard Choices’

In the fiscal 1988 budget, the Administration is making yet another effort, with the President declaring: “This budget presents hard choices which must be faced squarely.”

The biggest proposed savings would come from slowing down the federal government’s “spiraling health care costs,” the President said in his budget report.

Recipients of Medicare, the federal health care program for the disabled and those over 65, now pay $17.90 a month for insurance coverage for physicians’ bills and will pay $22.30 next year. Under the President’s proposal, new enrollees who become eligible in 1988 would pay $31.20 a month.

“It’s a rather arbitrary way to impose higher costs on people, treating them differently whether they happen to be born in 1922 or 1923,” said John Rother, legislative director for the 22-million-member American Assn. of Retired Persons. “I think this will be viewed with a lot of suspicion by Congress,” he said.

Denounced by Stark

Rep. Pete Stark (D-Oakland), whose subcommittee handles Medicare financing, immediately denounced the plan.

“The President says he won’t cut Social Security benefits, but his budget proposals do it through the back door by gutting Medicare benefits,” he said.

Hospitals, already under a tough cost-control program for Medicare patients, would face additional restrictions on the reimbursement they receive from Washington under the new budget. The hospitals, in turn, will be anxious to send Medicare patients home as quickly as possible, despite complaints from patients and their families, critics said.

The budget projects that these changes would shave $4.6 billion from the program’s anticipated costs in 1988.

Strict Medicaid Limits

In addition to the Medicare revisions, the Administration proposes strict limits for spending on Medicaid, the health care program for the poor, to save approximately $20 billion over a five-year period. In California, Medicaid is known as Medi-Cal.

States, many with budget problems of their own, would face the choice of replacing the lost federal benefits for their residents or reducing services.

“The Medicaid cap has been proposed repeatedly and rejected,” said Robert Greenstein, director of the Center on Budget and Policy Priorities, a research organization on poverty issues. “I don’t think there is any chance Congress will agree to it this time,” he said.

“There are a number of things that clearly won’t pass--this is a rerun budget,” he said.

The proposed federal cap would be approximately $19.8 billion for 1988.

Heating Bill Subsidy

The federal program that subsidizes poor people’s heating bills would be cut $665 million, or 35% below current levels. The number of new apartment units for the poor would be trimmed to 100,000, down from 150,000 in the 1987 budget.

A special program providing orange juice, infant formula, cheese and milk to 3.4 million pregnant women, infants and children would have its enrollment reduced by 50,000.

The Administration also asked Congress to eliminate a dozen smaller programs for the poor, including the Legal Services Corp., which provides free legal advice, and a job training project for welfare recipients.

Less for College Students

In a proposed cutback for both poor and middle-income families, college students would receive less financial help from the federal government.

“Students are the principal beneficiaries of their investment in higher education,” the budget document said. “It is therefore reasonable to expect them, not taxpayers, to shoulder most of the costs.”

Fewer Pell grants, which are distributed to students on the basis of need, would be allocated for families with incomes between $10,000 and $20,000, and that aid would be eliminated for those with incomes above $20,000. The current ceiling is approximately $29,000.

The budget calls for gradual elimination of guaranteed student loans, under which the government pays the interest while the student is in college. Students would pay the interest while in college or add it to the loan total for payment after graduation.

New 9% Fee Proposed

Student loans would cost more at the start, with the imposition of a new 9% fee, to cover future defaults. The current initial fee is 5%.

The Administration is attempting to “shift responsibility to college students for bringing down the federal deficit,” said Allan W. Ostar, president of the American Assn. of State Colleges and Universities. “The Congress has rejected cuts of that size every time, and I think the Congress will reject it again,” he said.

Under the Reagan budget plan, home buyers also would pay more if they use mortgages backed by the Veterans Administration or the Federal Housing Administration.

The fee on a VA loan would rise from 1% to 2.5%. FHA mortgages now carry a 3.8% insurance premium, which would rise to 5%.

“This represents taxes, pure and simple, to be imposed on moderate-income home buyers and the veterans of America,” said Warren Lasko, executive vice president of the Mortgage Bankers Assn. of America.

Increased Fees

The budget plan includes several other increased fees and charges to generate additional revenues.

For example, veterans with non-service-related ailments would pay for their VA hospital care if their income exceeds $20,000 for a single person, and $25,000 for a person with one dependent.

Other revenue would come from tourists and vacationers. There would be a $1 charge for each airline trip across U.S. borders and the maximum weekly admission charge at a national park would rise to $10 from $5. A handful of domestic programs were given special attention and expanded funding in the fiscal 1988 budget.

AIDS Gets Priority

AIDS (acquired immune deficiency syndrome) “remains the Administration’s highest public health priority,” the budget document said. The Administration requested $534 million for AIDS research and prevention, a $118-million increase over current spending. The government would concentrate on developing a vaccine and increasing public education through schools, clinics and counseling centers.

Addressing air safety concerns, the Administration proposed to add 225 air traffic controllers to the current work force of 15,000 and hire an additional 178 safety inspectors to the current group of 2,020. Improved radar and communications equipment would be installed at airports as part of a 20% rise in funding for the Federal Aviation Administration.

Hoping to head off protectionist trade legislation, the Administration is asking for additional help for workers who are laid off for extended periods.

Foreign Competition

A new Worker Adjustment Assistance Program would subsidize the workers’ training for new jobs and would pay them while they were in training. Although the assistance would be available to all workers in lengthy layoffs, the program is particularly aimed at those hit by cutbacks in industries that are suffering from foreign competition.

Current job training programs for long-term laid-off workers now serve 250,000 people a year. The new federal effort would enroll 700,000 people a year. The program would help the United States “respond to dislocation pressures triggered by international competitions, technological change, economic shifts and changes in consumer preferences,” said Labor Secretary William E. Brock III.

The Securities and Exchange Commission is one of the few agencies that would receive a hefty budget hike, being promised a 30% increase. The SEC success in pursuing insider trading scandals on Wall Street has prompted enthusiasm and support from both the Administration and Congress.

30 YEARS OF SHIFTING PRIORITIES

How the budget pie was sliced 1958 NATIONAL DEFENSE 53% All Other 15% Interest Payments 7% Payments to individuals 25% 1988 PAYMENTS TO INDIVIDUALS 46% National Defense 29% All Other 11% Interest Payments 14%