Reagan Backs Catastrophic Health Plan for the Elderly : Would Put $2,000 Lid on Expenses

President Reagan, ending more than two months of Administration bickering, today endorsed a Medicare catastrophic illness plan to give 30 million elderly Americans “that last full measure of security” against the grim choice of bankruptcy or death.

Under the plan, the government would cover all hospital and doctor expenses under Medicare after a patient had paid $2,000 out of his own pocket.

The extra coverage would add $4.92 a month--$59 annually--to Medicare recipients’ $17.90 monthly “Part B” premium, voluntary coverage which about 98% of Medicare beneficiaries subscribe to.

The plan would not cover long-term nursing home care. And it was accompanied by less substantive suggestions for catastrophic illness protection to the general population under 65.

“For too long, many of our senior citizens have been faced with making an intolerable choice--a choice between bankruptcy and death,” Reagan said in a statement. “This proposed legislation would go a long way to help solve that dilemma.”

‘Safe From Worst Fear’

“With the protection that this plan will provide, senior citizens will now be safe from the worst fear of old age--having their life savings taken away to pay the cost for an acute care due to a catastrophic illness,” he said in a speech to high school students later.

Reagan’s decision represented a victory for the secretary of health and human services, Otis R. Bowen, and a defeat for the private health insurance industry.

The topic had been the subject of intense debate among Reagan’s domestic policy advisers, with Atty. Gen. Edwin Meese III and Beryl Sprinkel, chairman of the Council of Economic Advisers, arguing against expanding Medicare at the expense of private insurers.

Bowen, noting that he had presented his ideas several times to Reagan, commented after the White House announcement, “I am happy to say that, as of 10 o’clock this morning, they are now the Reagan plan.”

‘Industry Can Be Stimulated’

Bowen said he did not believe the insurance industry would be hurt by the plan and added that by selling “Medigap” insurance to cover the $2,000 deductible, “I think the industry can be stimulated.”

Presidential spokesman Marlin Fitzwater, who announced Reagan’s decision to essentially back the Bowen plan, said legislation will be drafted soon and sent to the Congress, which must approve it.

Fitzwater maintained that the proposal would pay for itself through the higher premiums and was “consistent with the Reagan philosophy of providing coverage where possible at the lowest possible cost.”

First Day Not Covered

Under the current Medicare hospital insurance program, which is financed by Social Security tax deductions, only the second through 60th days of a hospital stay are covered. The first day must be paid by the patient or private insurance, as well as anything beyond 60 days a year.

For those under 65, Bowen’s plan calls on the Treasury Department to study creation of an Individual Medical Account, similar to the Individual Retirement Account, to give tax advantages to savings by middle-aged people for long-term health care later.

The recommendations would entail educating the public on the limitations of government insurance and, in cooperation with industry, encouraging people to buy private insurance plans. It also would require that catastrophic coverage be offered in all work-related insurance.