Budget Cutters Joining Battle Lines Around Medicare : Congress: Experts in both parties see need to curb growth of costly health program for the elderly. But polls show public takes different view.

WASHINGTON — As Congress approaches final votes on the proposed balanced-budget amendment to the Constitution, battle lines are already forming around one of the government’s costliest and fastest growing programs--Medicare, the giant health program for the elderly.

House Speaker Newt Gingrich (R-Ga.), calling recently for a task force to “rethink Medicare from the ground up,” has made it clear that the program will be one of the targets as legislators look for ways to balance the federal budget. “Everything is on the table except Social Security,” Gingrich said.

Gingrich’s friend, House Budget Committee Chairman John R. Kasich (R-Ohio), similarly has made it clear that “restructuring” Medicare is on his agenda.

President Clinton has played an ambiguous game. In his health care reform plan last year, he proposed a combination of partially unspecified Medicare spending cuts and a substantial increase allowing coverage for the first time of long-term nursing care. When Clinton’s health care plan died in Congress, Administration officials still talked of curbing Medicare growth, suggesting that the President would revisit the subject in the new budget he will submit Monday.

Since then, however, Clinton has warned about Republican plans for Medicare cuts. In his State of the Union speech, he vowed to “protect” Medicare--a move that won him increased support among elderly voters, a Times Poll indicated. Some analysts say they believe that the President’s words were intended to lay the groundwork for using the Medicare issue against the GOP in the 1996 election.

Administration officials now say flatly that Clinton will oppose any Medicare cuts unless they are done “in the context of an overall health care reform.” The Administration will avoid committing itself to specific cuts for now, and Clinton’s budget will say little, if anything, directly about how to control health care costs, officials say.

Clinton could be on firm political ground if he challenges the GOP over Medicare. Polls show a vast gap between the views of budget experts of both parties, who believe the growth rate of Medicare must be slowed, and the views of the public.

Budget experts look at numbers like this: In 1994, Medicare consumed roughly $145 billion--about 10 cents of every federal dollar. Within five years, that cost is projected to soar to $238 billion, driven in part by the growth of the nation’s elderly population (about 2% per year) but mostly by the escalating cost of medical care for the elderly (more than 10% a year.)

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That is only the beginning. During the next decade, just as the balanced-budget amendment is supposed to take effect, the baby boom generation will begin to hit retirement age, driving costs for Medicare and Social Security through the roof. Federal actuaries expect the Medicare hospitalization trust fund to run out of money in seven or eight years.

That problem could be averted if Congress changes the program now. If lawmakers wait until the fund actually runs dry, fixing it would require either very large cuts or more than doubling the 2.9% Medicare payroll tax.

The public sees things very differently. When respondents in a Times Poll last month were asked what two programs cost the federal government the most money, only 3% cited Medicare. By contrast, 29% mentioned defense, 22% named foreign aid and 21% singled out welfare. Defense (which accounts for 19% of the budget) actually does cost more than Medicare (10%). But foreign aid takes up only 1% of the budget, while welfare consumes between 1% and 10% depending on the definition.

Unaware of Medicare’s burden on the federal Treasury, the public does not regard it as a prime candidate for helping to balance the budget. In the Times Poll, only 9% said the program should be cut to reduce the deficit, while 88% said it should not.

In both 1990 and 1993, Congress approved plans to slice tens of billions of dollars from projected Medicare spending. But the savings were overwhelmed by the increase in the elderly’s medical costs.

The Congressional Budget Office has set out a menu of additional options that, five years from now, would save about $31 billion, or about 15% of the program’s projected cost that year. Actually reaching a balanced budget, however, would probably require deeper cuts than that.

“If you want to balance the budget, you’re probably talking about a 25% to 30% cut” in the projected level of Medicare spending, said Joshua M. Wiener of the Brookings Institution. “You’re not talking about nibbling around the edges.

“I don’t think the public has given a second’s thought to a major restructuring” of Medicare, he added. “The Republicans are going to have a very tough time making their numbers work.”

Exactly what Gingrich has in mind remains unclear. Asked about his statements, the Speaker said he wants to provide a “system that actually works more effectively, that gives (the elderly) greater choices, but that is also financially more honest.” He specifically mentioned allowing the elderly to join health maintenance organizations, which did little to clarify his intentions because Medicare beneficiaries already can do so.

Some conservative policy analysts have suggested replacing Medicare with health vouchers for all elderly Americans, who could use them to buy private insurance. Medicare’s current total spending of roughly $145 billion, split evenly among the program’s 36 million beneficiaries, would allow vouchers of roughly $4,000 per person.

Although that might be enough to help a relatively healthy elderly couple buy insurance, it would be unlikely to cover those with chronic health problems, who might find private insurance unavailable at any price.

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Another, less drastic remedy, which Gingrich may have been hinting at, would be prodding a higher percentage of the Medicare population into HMOs and other managed care programs. Medicare experts say they believe that HMOs could save substantial sums by cutting down the number of times that elderly people visit their doctors. So far, however, studies do not prove that HMOs would substantially restrain costs.

Asked in a second Times Poll last month if they would support charging the elderly more if they did not enter HMOs, respondents younger than 65--many of whom have already lost free choice of doctors in their own health plans--were closely divided, 43% for and 53% against. Those 65 and older, however, opposed the idea by a whopping 70% to 17%.

Men younger than 45 and people with family incomes in the $40,000-$60,000 bracket were most likely to support measures to cut Medicare. Respondents 65 and older, those with incomes below $20,000 and women disproportionately opposed cutting the program.

The poll found the most support for options that would limit cost increases to upper-income beneficiaries. For example, Medicare premiums for doctor bills once covered about half the costs of the program. The current premium of $46.10 per month covers only about 25% of costs. Asked if upper-income recipients should pay a higher premium, respondents--by 65% to 31%--said yes.

Similarly, respondents--by a 71% to 25% margin--supported charging upper-income people more for hospital stays. Currently Medicare requires people, regardless of income, to pay roughly $700 for their first day in the hospital. The next 59 days are free.

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Americans’ Views on Medicare

The Los Angeles Times Poll found the most popular options for lowering government costs would involve raising the burden on recipients with above average incomes.

Do you favor or oppose...

...requiring upper-income patients to pay for some of the first 60 days of their hospital stay rather than having it free, as it is now?

All 18-to-64-year-olds 65 and over Favor 71% 72% 68% Oppose 25 25 25 Don’t know 4 3 7

All 18-to-64-year-olds 65 and over Favor 65% 69% 50% Oppose 31 29 41 Don’t know 4 2 9

All 18-to-64-year-olds 65 and over Favor 39% 43% 17% Oppose 56 53 70 Don’t know 5 4 13

All 18-to-64-year-olds 65 and over Favor 30% 31% 22% Oppose 66 65 72 Don’t know 4 4 6

Source: Los Angeles Times Poll of 1,226 adults taken nationwide Jan. 25-26. The margin of sampling error is plus or minus 3 percentage points.