Senate Approves Major Expansion of Medicare

The Senate late Tuesday approved a major expansion of Medicare benefits, including a ceiling on out-of-pocket expenses for doctor and hospital bills and coverage of prescription drugs.

The 86-11 Senate vote, combined with House approval of a similar bill earlier this year, means that Congress is certain to adopt the biggest changes in Medicare’s 22-year history. The 31 million beneficiaries will save billions of dollars in medical bills.

President Reagan had threatened to veto the House version of the bill because of fears that its drug provision had uncontrollable costs. But the Senate on Tuesday approved a compromise drug amendment acceptable to the White House.

Approval Expected

The Senate’s version of the Medicare legislation is likely to prevail in a House-Senate conference, and the final bill seems certain to get a presidential signature.

The Senate plan, if enacted into law, would begin in 1988 with a total cap of $1,850 a year for personal outlays for hospital and doctor bills. After the patient paid this much out of his own pocket, the federal government would pay all additional charges. Drug provisions would be phased in between 1990 and 1993 and would be included under the ceiling as they took effect.

The House version, fully effective in 1989, would set a ceiling of $1,700 for total payments. Under current law, by contrast, there is no limit on out-of-pocket expenses.

The financing of the new Medicare benefits, known as catastrophic care, marks a radical departure for a federal social welfare program. For the first time, the recipients themselves, rather than the general taxpayers, would pay for the entire cost of the new program.

Most beneficiaries--the 60% of the elderly who pay no federal income taxes--will pay a flat monthly premium, about $4 under the House plan and $6 under the Senate version.

However, those who pay taxes would pay a supplemental annual premium, as much as $580 per person under the House version or $850 under the Senate plan.

A deficit-conscious Congress decided that the only way it could expand Medicare was through a self-financing mechanism.

Sen. Lloyd Bentsen (D-Tex.), chairman of the Finance Committee, which wrote the Senate bill, said the expanded coverage, which is optional, would be attractive even for those who must pay a substantial new premium.

“Anybody who doesn’t take it would be foolish in the extreme,” Bentsen said. “It’s still going to be the best deal in town and they had better take it.”

‘Nightmare of Costs’

“This is the age of medical miracles of artificial hearts and mechanical lungs . . . “ said Sen. John Heinz (R-Pa.). “The irony is that for millions of older Americans, this miracle becomes a nightmare of costs.”

A Medicare beneficiary now pays $520 for the first day in the hospital, then gets the next 59 days free. After that, the patient pays $130 a day.

The House and Senate plans would provide unlimited days of government-paid hospital care. Medicare also pays now for 80% of government-approved doctors’ fees, with the patient paying 20%. (If the doctor charges more than a Medicare fee schedule, the patient pays the balance.)

The House and Senate plans would combine the patient’s responsibility for doctor and hospital charges into a single, limited amount.

Depends on Spending

The value of the benefits to the 31 million Medicare recipients--those over 65 and disabled persons of all ages--would depend on how much they spend for medical care in a given year.

An estimated 2 million to 3 million persons a year whose hospital and doctor bills exceed the ceilings would save money under the new benefits.

In addition, 5 million persons who spend more than $600 a year for prescription drugs would get financial help under the Senate drug plan, which would be fully implemented in 1993. After the $600 deductible is reached, the government would pay 80%, and the patient 20%, of any additional costs.

Initial Restriction

The Senate amendment calls for the drug benefit to begin in 1990, with coverage initially restricted to compounds used for chemotherapy, intravenous feeding at home and for drugs used to combat infections after transplants.

In 1991 and 1992 it would expand gradually to include cardiovascular and diuretic drugs, about 40% of all prescriptions for the Medicare population. All prescription drugs would be covered beginning Jan. 1, 1993.

By contrast, the House-approved drug amendment would require a smaller payment by beneficiaries, $500 a year, after which the government would pay 80% of charges. The House program would take effect in 1989.

Costs Would Vary

The cost to individuals for the new benefit would vary considerably according to income. Government experts estimate the over-65 taxpayers, generally single persons with incomes above $11,000 and couples with incomes over $21,000 would pay the new variable premium.

The House bill hits hardest at the middle class.

The top premium, $580 a year, would be paid by the 2.4 million single persons who make more than $20,000 a year. About 1.5 million couples, with income in excess of $38,000, would pay $1,160 a year.

The Senate’s top rate, $850 a year, would hit a smaller group, the 550,000 single persons earning more than $60,000 a year. For couples, the maximum would apply only to the 400,000 who earn more than $90,000 a year.