Projections of Catastrophic Care Cost Soar $18 Billion

A confidential Administration study warns that the projected cost of Medicare’s catastrophic care benefit has skyrocketed by $18 billion, and the White House said Tuesday that complaints about the surtax enacted to finance the program are coming in “tidal waves of immense proportions.”

The latest cost estimate, circulated privately among House Republicans, shows projected spending of $48 billion over five years. The figure is drastically higher than the original forecast of $29 billion, made when the legislation was first approved last summer.

The new estimate was prepared by the Health Care Financing Administration, whose experts are working on further cost revisions. They hinted that the numbers may rise even more because of uncertainties over the cost of drugs and skilled nursing care, two of the key benefits.

However--despite the swelling protests from persons over 65--the White House has been unable to settle on any plan of its own to rewrite the legislation, which is projected as increasingly expensive. Many of those over 65 who pay income taxes face a special surtax that ranges from $22.50 to $800 a year. The surtax is due for the first time on tax bills for 1989.

In dealing with Congress on the fiscal 1990 budget, the Bush Administration is using apparently outmoded cost estimates, which indicate that the program will produce a temporary surplus of about $5 billion for 1990. Like other insurance programs, the catastrophic plan would build up revenues in its early years to pay benefits later.

The theoretical surplus of $5 billion is vital to keeping the overall federal budget within the deficit limits under the Gramm-Rudman spending law. If the limits are breached, Congress and the President would face the politically onerous choice of cutting other programs or raising taxes.

Senior White House officials said that, although the President’s aides are involved in discussions with congressional leaders, the Administration has not settled on an approach to the problem.

A senior official said: “I don’t know where we’re going. It’s getting more and more attention. We’re hearing about it.”

Meets With GOP Leaders

Bush met during the morning with House Republican leaders, focusing on the congressional agenda and, in particular, the catastrophic health insurance issue.

“The President assured them that we share their concern for its impact on senior citizens, that we have been looking for a way to mitigate this situation for the last couple of months,” White House Press Secretary Marlin Fitzwater said. “We have not found an answer yet.”

The Administration “thought it was a good program in the past, as did most of the Congress. People still think it’s got good objectives, but they have felt the heat,” Fitzwater said. “I hope there’s not any misapprehension about the political aspects of this program. I mean, the elderly complaints are rolling in, in tidal waves of immense proportions.”

Congressmen Irritated

The apparent hands-off attitude at the White House is irritating members of Congress who are trying to change the controversial law.

“My deep concern is that the Administration is looking more toward budget questions, when I think the committee is concerned about how this affects people on Medicare,” Sen. Lloyd Bentsen (D-Tex.), chairman of the Senate Finance Committee, said Tuesday.

The Finance Committee is striving to prepare a stripped-down version of the law. “What we are trying to do is structure a bill with essential parts,” Bentsen said.

The committee is struggling with different ways to reduce the surtax and compensate for the lost revenues by cutting benefits.

Unlimited Hospital Care

In its current version, the catastrophic program provides unlimited days of hospital care after the beneficiary has paid $560 for the first day; a cap of $1,370 on out-of-pocket spending for doctor bills, and, for the first time, Medicare coverage of drugs, with the government paying 50% of charges after the first $600.

The hospital benefit began this year. The ceiling on payments for doctors’ charges is scheduled to start next year, with full drug coverage in 1991.

The Administration’s latest estimate, a copy of which was obtained by The Times, says that these benefits will cost $48.4 billion over five years, but the surtax and premiums will bring in $42.8 billion, leaving an overall deficit of nearly $6 billion. The figures were prepared late last week.

This is a much more pessimistic evaluation than the judgment of congressional experts, who said last year that the program would run a surplus, with revenues of $33.6 billion and outlays of $29.4 billion.

Drug Prices a Factor

Since then, cost estimates have risen sharply because of expectations that drug prices will outpace inflation and that many more people will take advantage of the new benefits. In addition, estimates of spending for skilled nursing home care, an expanded benefit under the legislation, are rising rapidly.

The Administration’s new figure, at least $48 billion, is the highest estimate from any source.

Catastrophic care benefits are financed partly by a flat monthly premium--$4 this year--paid by all Medicare beneficiaries.