Need for Disputed Medicare Surtax Cited

The Bush Administration is urging Congress to think twice before cutting taxes that will finance a catastrophic illness insurance program for millions of older Americans.

Until the government can get a better estimate of how much the surtax will bring in and how much the catastrophic coverage will cost, “Treasury would not consider it prudent to alter the premium,” Assistant Treasury Secretary John G. Wilkins told the Senate Finance Committee on Thursday.

The panel and the House Ways and Means Committee are considering several bills to repeal or delay the surtax, which was enacted less than a year ago.

Many older Americans say they do not need the coverage because they have private insurance. Others complain that they cannot afford the surtax, which this year is 15% of a Medicare beneficiary’s federal income tax of $150 or more. About 40% of older people would pay the surtax; the maximum tax is $800 per beneficiary.

Unless Congress makes some changes, said Rep. Harris W. Fawell (R-Ill.), “there is going to be a popular revolt the likes of which haven’t been seen since” a massive mail campaign led to repeal of the withholding of taxes from interest and dividend payments in 1983.

Efforts to change the catastrophic law gained momentum recently when Sen. Lloyd Bentsen (D-Tex.), chairman of the Finance Committee, disclosed government forecasts that the new tax will bring in more than had been estimated just a year ago. He raised the possibility of cutting the tax.

During the five years ending in 1993, the Congressional Budget Office now estimates, the surtax is likely to bring in about $10 billion more than is expected to be spent for catastrophic benefits.

However, Administration officials cautioned that the surplus may never be realized because a new drug benefits program starting in 1991 could cost more than estimated.

“We cannot recommend a reduction in premium (surtax) revenue at this time, knowing that the drug benefit faces financial difficulty in the near future,” said Louis W. Sullivan, secretary of health and human services.

Sen. Carl Levin (D-Mich.), sponsor of a bill to require upper-income Americans of all ages to pay for the program, said the elderly are unwilling to pay the surtax.

“They don’t understand . . . why they are the only group in our society which is being asked to subsidize another part of their group,” Levin said.