Bush, Bentsen Clash Expected : President Opposes Cut in Medicare Surtax

President Bush said Monday it “would be imprudent” to change the new Medicare catastrophic care program, dismissing a proposal to cut the controversial surtax imposed on recipients to pay for the benefits.

The President’s statement set the stage for a confrontation with powerful Senate Finance Committee Chairman Lloyd Bentsen (D-Tex.) and other legislators who are feeling the heat from constituents angry over what they consider an unfair financial burden from the program.

Bentsen said last week that it now appears the tax will produce an unexpected surplus and that the charge should be cut by at least 16% from levels that can now range up to $800 a year per person.

However, Bush asserted, “We should not now reopen the legislation,” in a letter to Rep. Dan Rostenkowski (D-Ill.), chairman of the tax-writing House Ways and Means Committee. “. . . It would be imprudent to tinker with Medicare catastrophic insurance, literally in its first few months of life.”

Moreover, he said, projected financial reserves from the tax, which goes into effect next year, “are not excessive.” He warned about the “uncertainty” of estimating revenues in a new federal program.

Collected in April, 1990

The special surtax will be collected for the first time when Medicare beneficiaries pay their federal taxes in April, 1990. The charge will be imposed on the 40% of Medicare recipients who earn enough income to pay federal taxes.

Bentsen refused to retreat Monday in the face of Bush’s rebuff and reaffirmed his determination to cut the Medicare surtax. Bentsen promised to hold hearings on the issue, fueling a potential high-stakes clash over the financing of one of the broadest new social programs enacted in years.

The program, designed to help those suffering from catastrophic illnesses by providing virtually unlimited hospital care and other benefits, was passed last year after a series of key legislative compromises. The program is fully financed by the beneficiaries’ surtax and premiums.

“The Congress never intended older Americans should pay more than the operating costs,” Bentsen said in a statement. “We built in surplus revenues, and we should not ignore a mistake that generates twice as much in reserves as was planned.”

The President emphasized in his letter that any reserves would be available exclusively for the Medicare program. Bentsen seized on this remark to accuse the Administration of playing budget games, because any unused revenues in the Treasury would count against the huge federal budget deficit.

‘Day of Reckoning’

“Excess reserves will make the deficit look smaller, over $1 billion smaller in the coming fiscal year and once again postpone the day of reckoning on the deficit,” Bentsen said.

“Why should older Americans pay a higher premium not for more health insurance but for a bookkeeping gimmick that allows the government to avoid tough choices on the budget?” the Finance Committee chairman said. “The technicians made a mistake in the catastrophic care estimate, and I believe it must be rectified--it’s just that simple.”

The total surplus would be $4.2 billion over five years, according to Bentsen.

Rostenkowski Agrees

Bush’s letter was released Monday by Rostenkowski, who also opposes reopening the legislation. “I welcome this expression of the President’s continued support for the Medicare Catastrophic Coverage Act,” he said.

Until Bentsen broke ranks last week, the top leadership of the Democratic-controlled Congress was holding fast against changes in the program, the biggest expansion of Medicare since the health program was enacted in 1965.

The catastrophic care measure on Jan. 1 began offering unlimited days of free hospital care after a Medicare beneficiary pays $564 for the first day. Additional benefits, including coverage of prescription drugs for the first time, are scheduled for later years.

Premium Tied to Income

All Medicare beneficiaries--those over 65 and the disabled--pay $31.90 a month for an insurance premium that covers doctors services and the new catastrophic care benefit. In addition, there is the controversial premium linked to income. The rate is $22.50 for each $150 of federal tax obligation. The maximum is $800 for an individual and $1,600 for a married couple.

The most vociferous protests have come from retirees who already have extensive medical coverage and feel they are being forced to pay too much for little additional benefit.

Many of the complaints are coming from California, the home of more than 300,000 retired federal civil servants and military personnel. “We call this a piggyback tax” because it pushes so many citizens into a higher tax bracket, said Denis Harrington, public relations director for the National Assn. of Retired Federal Employees. “There’s duplicative coverage for many people.”