Panel Will Consider Deep Cuts in Catastrophic Care Tax

The Senate Finance Committee, hoping to save the controversial catastrophic care program, today will consider a substantially reduced plan that would virtually eliminate all benefits except the cap on spending for hospital and doctor bills, sources said.

The proposal, promoted by chairman Lloyd Bentsen (D-Tex.), would slash the maximum payment for the special surtax on Medicare beneficiaries to $400, down from $800. The tax rate would be cut to 10%, down from 15% of a beneficiary’s federal income tax obligation.

By proposing to cut the tax, the committee hopes to placate the angry senior citizens who have been complaining about the unique levy, which is restricted to those over 65 who pay federal income taxes.

Bentsen and his allies on the committee hope their truncated version of catastrophic care, with a much lower price tag, can preserve the essence of the legislation against the calls for outright repeal.

The prescription drug benefit, which would have provided government payment for 50% of drug bills in 1991 after the patient paid $600, would be virtually eliminated under the proposed reform. The skilled nursing benefit, which provides nursing home coverage for persons with an acute, treatable ailment, also would be severely restricted.

The proposal up for review today also cuts back the help Medicare would provide for patients with large outlays for doctor bills. As of next year, the plan was to have Medicare pick up doctor bills after the patient had spent $1,370. However, the cap would be raised to $1,780, and the effective date postponed until 1991 under the plan Bentsen will suggest to the Finance Committee today, sources said.

Hospital care financing is the only major provision of the catastrophic care program that seems likely to escape radical surgery in the Finance Committee. The Medicare beneficiary pays $560 for the first day in the hospital, and receives any additional days of care without charge. The improved hospital benefit--covered care formerly was limited to 60 days--began Jan. 1, and Congress is reluctant to tinker with it.

In the House, meanwhile, Democratic leaders were scrambling to find a possible alternate financing method for catastrophic care to head off an increasingly powerful drive to repeal the legislation. There have been informal discussions among influential Democrats about raising the wage base for collecting Social Security and Medicare taxes to help generate additional revenues. The current tax is 7.51% (including 1.45% for Medicare) of the first $48,000 in wages.

The catastrophic care bill was overwhelmingly approved by Congress last year and hailed as the biggest expansion of government health programs since Medicare was created in 1965.

All 33 million Medicare beneficiaries pay a flat monthly fee, $4 this year, to help finance the program. But controversy erupted because most of the money comes from the surtax on 40% of the beneficiaries, those who pay federal income taxes.