Catastrophic Care: Taking Beating, It Needs First Aid

Fanning a blaze that is flashing across the nation’s political grass roots, Herman Mulman stands tall among a gathering of Seniors for Action at the Van Nuys-Sherman Oaks Senior Citizens Center and assails a new Medicare program designed specifically for their benefit.

“This,” declares the former postal worker, a 72-year-old graybeard in a flowery Western shirt and blue jeans, “is the most horrendous piece of legislation ever jammed down the throats of a minority of citizens.”

The catastrophic health insurance program, hailed when it was enacted last year for finally protecting the elderly against ruinous medical costs, has instead turned into a catastrophe for those in Congress who created it.

“In my seven years in Congress, no other issue has so captured the imagination of so large a group of constituents,” Rep. Howard L. Berman (D-Panorama City) says.

The only question now is whether Congress will cut back the new Medicare program or consign it to the scrap heap. Proposals to repeal it, or at least to perform major surgery, will face a crucial vote in the House this week.

The program sounds appealing enough. For America’s 33 million Medicare beneficiaries, it provides financial protection against long-term hospital stays, massive doctor fees and the mounting cost of prescription drugs.

But it created a grass-roots firestorm that caught the supposedly canny politicians who enacted it--and even many Washington lobbyists for the elderly--by surprise.

The sources of this rage are not hard to find.

The catastrophic care program socks the most affluent and politically articulate elderly--the 40% whose incomes are large enough that they must pay income taxes--with a 15% surtax of up to $800 a year. But many of these same elderly say the new program’s benefits largely duplicate free coverage many of them already have through private pension plans.

The rest of the elderly are not much happier. All of them, no matter how poor, must pay an extra $4 Medicare monthly premium in return for their new benefits. And even many of those who pay nothing more than the $4 a month say they have private insurance that already provides hospital, doctor and drug benefits just about as good as those now available from Medicare. All the elderly, rich and poor, share another complaint. The new program covers only a tiny part of what is usually the most catastrophic medical expense of all: long stays in nursing homes.

“It’s not the surtax that’s the big problem, it’s the lack of benefits,” says Joseph Schwartz of North Hollywood, former chief executive of a life insurance company. “I believe that the seniors would not give you a whimper--I believe they would go along with an even higher surtax--if there was a national health plan for everyone that took care of all the gaps we have today.”

And most galling of all to the elderly, the new plan violates a central principle of virtually every piece of social welfare legislation, including Social Security itself. It puts the cost entirely on the beneficiaries instead of spreading the burden over the whole population.

“That is the rub,” says Sally Abrams of North Hollywood, a red-haired former real estate broker and insurance agent. “They selected one group of people to pay an extra tax in addition to the regular tax. It makes many, many seniors afraid they will have to go on welfare.”

More mysterious than the revolt against the program is how official Washington--Congress, former President Ronald Reagan and even the elderly’s own representatives in the capital--could have waded into such a swamp in the first place. Looking back, participants cite a host of factors:

Proponents mistakenly assumed that a limited package of benefits would command almost as much appeal as the comprehensive one actually sought by the elderly but rejected by federal officials as too costly.

Reagan, who proposed a catastrophic care plan, misgauged the impact of insisting that users of the new Medicare program be required to pay for all of it.

Congressional Democrats, given a rare recent opportunity to expand a social program, added sweeteners to Reagan’s plan and paid for them with a financing scheme that was intended to hit the rich harder than the poor but that also stung the bulk of middle-income elderly.

Despite terming the catastrophic care plan inadequate, the American Assn. of Retired Persons lent strong support to it because it contained enticing new drug benefits--benefits that helped not only the elderly, critics say, but also the lobbying group itself, which is a major drug marketer.

Congress did not take seriously a flood of mail opposing the bill because the outpouring was prompted by a group widely criticized for its high-pressure fund-raising techniques and alarmist pronouncements--the National Committee to Preserve Social Security and Medicare, headed by former Rep. James Roosevelt (D-Calif.).

Unlike most new social programs, “there was never a constituent outcry for this particular legislation,” says Judy Park, chief lobbyist for the National Assn. of Retired Federal Employees and co-chairwoman of a coalition of 46 groups seeking repeal of the surtax and a commensurate scale-down of benefits.

“The seniors were calling for long-term care,” Park says, “but that was beyond the realm of possibility.” The cost of insuring the elderly against nursing-home costs is estimated at up to $50 billion a year. The catastrophic care bill, by contrast, is expected to cost about $10 billion a year when its full benefit package kicks in.

Despite the uproar, many of the program’s initial champions in Congress are not ready to abandon it.

Sen. Bill Bradley (D-N.J.) suggests that “loose talk about repeal” is “dominated by a very small segment of senior citizens in this country,” the ones who are faced with paying the maximum $800 surtax.

Repeal “will deny someone’s right to get an operation,” Bradley says. “Do we try to make things less onerous on the basic taxpayer in the middle class, or do we try to help the top 5% of senior citizens” by removing the surtax?

Senate Aging Committee Chairman David Pryor (D-Ark.), who hopes the program can be saved if it is trimmed, contends critics have serious misconceptions about it.

“A lot of it is psychology,” he says. “They would rather go out and buy Medigap policies from insurance agents that they know and sing in the choir with. They don’t understand what benefits they’re going to have under this catastrophic program, but they understand what the guy down the street tells them about his policy. They believe him more than they believe us.”

But Pryor concedes that “the situation looks pretty desperate . . . .”

The Bush Administration supports the salvage efforts largely because of budget concerns. In its early years, the program is building up a reserve against the beefed-up benefit package that it will make available in 1991. The Administration is counting on the surplus generated by the catastrophic care program to reduce next year’s federal deficit.

The committees that wrote the catastrophic care bill are working to keep it, in truncated form. The proposal headed to the House floor this week from the Ways and Means Committee would cut the surtax in half but add another $3.50 a month to the Medicare premium paid by the elderly. A proposal before the Senate Finance Committee would reduce the surtax from 15% to 12% and the maximum surtax from $800 to $585.

The way Berman sees it, Reagan “put us into a box” in 1987 when his catastrophic care proposal prescribed only a limited expansion of Medicare financed solely by beneficiaries.

“It was a chance to really accomplish something during those eight barren years, and it caused us not to scrutinize reaction among seniors to the financing mechanism,” Berman says. Rep. Anthony C. Beilenson (D-Los Angeles), whose district abuts Berman’s, was one of only 72 House members who voted against the bill. In a flurry of newspaper op-ed pieces, Beilenson argued that the measure “covered the wrong catastrophic needs” and would cost so much that Congress would be discouraged from ever extending coverage to nursing homes.

“A decent number of colleagues had reservations about the bill, but there seemed to be so much public support that it was bad to vote against it,” Beilenson says now. He is pushing repeal “so we can go back to square one and provide the long-term coverage that everyone needs and wants.”

The American Assn. of Retired Persons professes astonishment at the breadth of unhappiness. Officials figured to hear from only the 5.5% of the elderly who have to pay the full $800 surtax when they file their 1989 tax returns next April.

“On paper, everybody else came out way ahead on the benefits,” says John Rother, AARP’s legislative director. “From our polling and meetings around the country, the key to the whole opposition is a misperception that everyone has to pay $800 or that most of them already have the benefits.

“Actually, about 70% of the older population has a Medigap policy and another 10% has Medicaid, but those generally don’t reach the long-term hospital care or drug benefits in the catastrophic program.”

Opponents also accuse AARP of supporting the program to boost business for its mail-order drug service. Rother says a study by Money magazine found that there was “no possible AARP gain from the drug benefit.”

Far from the politicians and lobbyists, many of the elderly at the grass roots are tired of being told about their misconceptions and their greed.

“People think that if you’re over 65, you either are sickly or you’re certainly not intelligent enough to figure out these scams,” says Lucille Wildman, a retired interior decorator who attended the Van Nuys-Sherman Oaks meeting. “We do think, and we are aware of what’s happening. And more and more of us are determined not to reelect any of the incumbents unless they make some effort to do something.”

Mulman puts it even more forcefully. “These congressmen who want to give themselves a 51% raise because they can’t live on $89,500 a year are telling us who make $14,000, $17,000 and $20,000 that we are affluent and we can afford the surtax,” he says. “It’s fallacious, it’s arrogant and it’s cause for defeat of anybody who continually uses that argument.”

COSTS AND BENEFITS WHAT THE ELDERLY PAY

Medicare premium: The monthly premium for Part B, which covers doctor bills, includes a catastrophic care charge of $4 in 1989, $4.90 in 1990, $7.40 in 1991, $9.20 in 1992 and $10.20 in 1993.

Surtax: The elderly who pay income taxes--about 40% of the total--pay a surtax of 15% up to a maximum surtax of $800 a year. The surtax rises to 25% and a maximum of $850 in 1990, 26% and $900 in 1991, 27% and $950 in 1992 and 28% and $1,050 in 1993.

WHAT THE ELDERLY RECEIVE

Effective Jan. 1, 1989:

Hospital: Medicare no longer requires the patient to pay a share of costs after 60 days of hospitalization. The patient continues to pay $560 for the first day of care, and all remaining days are free.

Skilled nursing care: For patients recuperating from a treatable medical problem and requiring medical attention from a nurse, Medicare covers the costs even if the patients have not just spent at least three days in a hospital. The benefit is available for 150 days a year. Patients pay $25.50 a day for the first eight days.

Hospice: The 210-day lifetime limit for the benefit is eliminated.

Poverty: States pay the monthly premiums and deductibles under Medicare for persons with incomes below 85% of the poverty line. All pregnant women and infants under 1 year old in families living below the poverty line become eligible for Medicaid.

Effective Sept. 30, 1989:

Spousal protection: A spouse of a nursing home patient may keep more of the family income and assets when Medicaid begins picking up nursing-home costs. In California, which has asked for a waiver, this provision takes effect Jan. 1, 1990.

Effective Jan. 1, 1990:

Doctor bills: Patients still pay the first $75 a year in doctor bills and 20% of the rest, but Medicare picks up all additional costs when patients’ costs reach $1,370 a year.

Intravenous drugs: Patient pay the first $550, and Medicare then pays 80% of the rest.

Home health: Medicare covers home health care up to 38 consecutive days.

Mammograms: Medicare pays up to $50.

Poverty: States pay the monthly premiums and deductibles for persons with incomes below 90% of the poverty line.

Effective Jan. 1, 1991:

Prescription drugs and insulin: Patients pay the first $600 a year, and Medicare then pays 50% of the rest, rising to 60% in 1992 and 80% in 1993 and thereafter.

Poverty: States pay the monthly premiums and deductibles for persons with incomes below 95% of the poverty line.