Panel Considers Making Catastrophic Care Voluntary

Members of the Senate Finance Committee, struggling to save the embattled catastrophic care program for Medicare beneficiaries, are considering making participation voluntary, sources said Thursday.

Under a proposal discussed at a meeting of the committee, beneficiaries could drop the catastrophic care program if they also agreed to drop Part B of Medicare, which covers doctors’ fees and now enrolls 99% of all Medicare beneficiaries.

The House Ways and Means Committee, as expected, adopted a similar provision Thursday as part of a major tax bill that would also cut the capital gains tax rate.

The Finance Committee has been meeting in private to come up with ways to reduce by 40% or 50% the surtax paid by the elderly to finance the controversial catastrophic care program. Sources said committee members discussed requiring all state and local government employees to pay the Medicare payroll tax.

Committee votes on the proposals could come as early as Tuesday.

About 25% Exempt

The payroll tax accounts for 1.45% of the Social Security tax on annual income up to $48,000. About 25% of state and local workers are now exempt from the Medicare tax; employees of the state of California and most of the state’s major municipalities already pay it.

Imposing the tax on those workers would collect about $6.9 billion over five years.

But the additional funds would not be enough to avert a significant reduction in benefits under the catastrophic care program. Estimates of its five-year cost have soared to $48 billion, contrasted with $30 billion when it was passed by Congress last summer.

Big benefit reductions seem inevitable.

The reductions would be necessary because 60% of the funding for the catastrophic care program is scheduled to come from the unpopular surtax on Medicare beneficiaries who pay federal income tax. The surtax is 15% of an individual’s federal tax bill, up to a maximum of $800. It will appear for the first time on income tax bills for 1989.

Rate Cut Wanted

Sen. Lloyd Bentsen (D-Tex.), the Finance Committee chairman, and his colleagues want to cut the 15% rate and the $800 maximum.

But they want to leave untouched the $4 monthly premium paid by all Medicare beneficiaries to help finance the catastrophic care program. The House Ways and Means Committee voted earlier to raise the premium while cutting the surtax. But Finance Committee members have rejected this approach because it shifts more of the burden to the low-income elderly.

To save catastrophic care, Finance Committee Democrats are trying to shrink the program and find new revenue sources.

Despite a wave of protests from senior citizens, members of the committee are determined to avoid repeal if it can be avoided.

“What we have to do, I think, is . . . make it optional,” Bentsen said Thursday on NBC’s “Today” show. When the committee members met privately later, there was general agreement to accept Bentsen’s idea, sources who attended the meeting said.

The voluntary approach links the fate of catastrophic care to the Part B portion of Medicare under which the government helps pay doctor bills. Part B is very popular: 32.6 million people are enrolled in Medicare Part A, which pays hospital bills, and 32.1 million also have signed up for Part B. Under the voluntary approach, a recipient who did not like the catastrophic care program could avoid it by dropping Part B coverage. Committee members are convinced that this would force the elderly to take a close look at catastrophic care. Many might decide that it was a better deal than comparable coverage offered by private insurance companies.