Paychecks to Medicare--New Federal Laws Take Effect

The new year ushers in an array of federal laws and regulations affecting everything from the size of Americans’ paychecks to the operation of the Panama Canal.

During the first week of 1990, Social Security taxes and benefits will go up, Medicare coverage will be cut back because of the repeal of catastrophic illness insurance and the canal will get a Panamanian administrator.

Long-term programs will be started Jan. 1 to control Medicare payments to doctors, close military bases, prevent an accidental clash between U.S. and Soviet forces and set up new task forces to fight organized crime.

The new laws and regulations include:

Social Security--Automatic 4.7% cost-of-living increases start for 39 million Social Security and Supplemental Security Income recipients. Average monthly benefits rise from $541 to $566 for Social Security and from $368 to $386 under SSI.

The total Social Security tax rate rises from 7.51% to 7.65% and the maximum earnings subject to the tax will be go up from $48,000 to $51,300. The maximum tax bite will rise from $3,604.80 to $3,924.45.

The amount of money Social Security recipients can earn without a reduction in benefits increases from $8,880 to $9,360 for those between ages 65 and 69 and from $6,480 to $6,840 for those under 65.

Panama Canal--Under the 1979 Panama Canal Act, the U.S. administrator, Dennis McAuliffe, steps down and turns over day-to-day control of the waterway to a Panamanian, who reports to the U.S.-dominated canal commission.

Until the administrator nominated by the new government of Panama is approved by President Bush and the Senate, the deputy administrator, Fernando Manfredo, a Panamanian, will be acting administrator. Panama takes over the Canal on Dec. 31, 1999.

Medicare--Because of the repeal of the Catastrophic Coverage Act, 32.6 million senior citizens lose some hospitalization, skilled nursing and hospice benefits.

In one major change, seniors face paying a hospital deductible for each 90-day benefit period and daily $148 co-payments after the 60th day. Under the old law, the elderly received 365 days of hospitalization for one deductible.

Because of a computer glitch, the monthly supplemental catastrophic coverage premium will be deducted from Social Security checks and then refunded for several months.

The hospital deductible automatically increases from $560 to $592 to cover rising costs. The monthly Part B premium, covering doctor fees, rises from $27.90 to $28.60. But because seniors no longer owe a supplemental premium, Part B costs actually will be lower.

The program to control the growth in Medicare payments to doctors and to shift spending from specialized procedures begins. In 1990, a 9.1% rise in costs has been targeted, contrasted with recent increases of 16%.

National Security--The military begins a program to close 86 bases by 1995. The cost-saving plan was drafted by a commission created by Congress and took effect when congressional opponents failed to muster enough votes to kill it in April.

Communications between the United States and the Soviet Union will be improved to prevent accidental conflict.

Taxes--Farm workers subject to Social Security withholding will be subject to income tax withholding.

The excise tax paid by passengers on international flights from the United States increases from $3 to $6.

A new excise tax of $3 will be charged each passenger on some ocean voyages.

An excise tax of 5 cents a barrel will be levied on crude oil and imported petroleum products to create a trust fund to clean up oil spills.

An excise tax on ozone-depleting chemicals will take effect.

Tax preparers who fail to sign a return or fail to include a taxpayer identification number will face new penalties.

Loan Programs--The Veterans Affairs Department will guarantee up to $46,000 of a home loan for a veteran or a survivor, up from $36,000.

Schools whose students have fault rate of 30% or more will be excluded from the program.

Miscellaneous--Organized crime task forces will be set up in each of the 23 U.S. attorney’s offices, replacing autonomous task forces.