Senate Scraps Surtax on Elderly, Saves Some Catastrophic Benefits

The Senate broke with the House Friday and voted to retain some catastrophic illness benefits for the elderly while also scrapping the income-based surtax that led to howls of protest from senior citizens.

The Senate approved a bill by Sen. John McCain (R-Ariz.) that eliminates the surtax for wealthier senior citizens as well as caps on doctor fees and prescription-drug costs. It retains hospitalization coverage financed by a flat monthly fee paid by all of the elderly.

Congressional negotiators will next have to work out a compromise between the House-passed outright repeal and the pared-down program approved by the Senate or choose one of the two approaches.

The Senate cleared the way for consideration of the McCain plan by voting 73 to 26 against a motion for repeal sponsored by Sens. John C. Danforth (R-Mo.) and William V. Roth (R-Del.).

The Catastrophic Coverage Act, the largest expansion in Medicare’s 24-year history, was enacted last year to prevent an extended illness from wiping out a senior citizen’s savings. At that time, it was hailed as a milestone of President Ronald Reagan’s second term and as a model for programs that would be financed by the people who benefited from them.

But the surtax came under harsh attack from seniors who objected to being singled out for a tax increase, and the House voted 360 to 66 Wednesday to repeal the greatest expansion of benefits in the 24-year history of Medicare.

Senate leaders united early in the debate behind a proposal introduced by Sen. Dave Durenberger (R-Minn.) that would have reduced the surtax while keeping the hospital benefit and the cap on doctor fees.

But after its defeat on a 62-37 vote, those who wanted to preserve some catastrophic benefits embraced the McCain proposal, which Republican leader Robert Dole of Kansas called “the next-best option.”

“The McCain proposal gives us the opportunity to move away from the surtax . . . (and) provide protection,” said Sen. Paul Simon (D-Ill.). “I think we should say no to the income tax and yes to senior citizens, we are going to give you some protection.”

Danforth argued that a vote for repeal would open the way to consideration of new plans for a comprehensive solution to the health problems of the elderly and the nation and criticized the McCain approach as incomplete.

Benefits Duplicated

“The issue of health insurance is not going to go away. . . . There is only one reason to vote against repeal--you believe the McCain proposal is the way to go in catastrophic health insurance,” he said. “Why write into law a program that we are not sure of?”

Other repeal supporters argued that even with financing changes, the catastrophic plan duplicates benefits seniors already have and failed to give them the coverage they really want--such as for custodial nursing home care.

“The plain truth is the American people understand that this program stinks,” said Sen. Phil Gramm (R-Tex.).

But opponents of repeal said such an action would make it harder to pass future health legislation and argued that it would backfire on millions of the elderly--many already receiving hospital coverage.

‘People Will Die’

“If we repeal this bill, people will die and/or go bankrupt,” protested Sen. Bill Bradley (D-N.J.).

The original bill included a surtax that would hit 28% with a $1,050 limit for the wealthiest senior citizens in 1993. The McCain bill would eliminate the surtax. All financing would come from the flat fee, which starts at $4 a month this year and rises to $10.20 a month by 1993.

The proposal would eliminate the $1,370 limit on out-of-pocket doctor fees as well as the prescription-drug benefit, which would have covered the bulk of costs once a patient had paid $600.

Benefits retained by McCain include 365 days of free hospitalization after payment of a deductible of $560 this year, Medicaid benefits preventing spousal impoverishment, home health care, respite care, mammography screening, intravenous and immunosuppressive drugs and hospice care.

Plan Endorsed

Health and Human Services Secretary Louis W. Sullivan had endorsed the Durenberger plan Thursday, but White House spokesman Marlin Fitzwater told reporters Friday that the Adminstration was not supporting any specific proposal.

“There was a situation yesterday in which there was a misunderstanding between the secretary of HHS and the Administration,” Fitzwater said. “We have told the Senate that we would not take a position on any of those (plans).”

Senate Finance Committee Chairman Lloyd Bentsen criticized the White House for failing to take a position before the vote, asking on the floor, “Where is the leadership from the Administration?”

McCain argued against the Durenberger proposal because it retained the surtax. He said the costs of the catastrophic program in that proposal would rise and that as long as it had a surtax, it would go up too.

“The object of the anger of the seniors today is the surtax,” he said. “Sooner or later that surtax will increase.”