Senate OKs Higher Medicare Charges for Wealthy Elderly

In a major step intended to shore up the financial health of Medicare, the Senate voted Tuesday to require affluent seniors to pay substantially more for the benefits they receive.

Taking another politically risky move, the Senate also decreed that members of the baby-boom generation must wait until age 67, an increase of two years, to qualify for Medicare coverage.

The Senate move poses a political challenge for President Clinton and House leaders, who had hoped to avoid immediate consideration of major Medicare reforms by handing the issue to a special commission for study.

The changes, if signed into law, would deal an immediate financial blow to the 1.6 million Medicare beneficiaries whose incomes exceed $50,000 for individuals and $75,000 for couples.

The premiums they pay to receive coverage of doctor bills would increase on a sliding scale, from the current $525 a year to a maximum of $2,102 per person for individuals with incomes of $100,000 and couples with incomes of $125,000.

The age of Medicare eligibility, now 65, would begin climbing in the year 2003, reaching 67 in 2027. Anyone who is 59 or older now would not be affected by the change.

Both proposals were endorsed Tuesday by substantial majorities as the Senate took up amendments to a key budget bill scheduled for a final floor vote today. The measure also makes other changes affecting Medicare and restores welfare benefits for some legal immigrants.

The House begins debate today on its own Medicare bill, which does not contain the bigger premiums or higher eligibility age.

The conflicting positions on Medicare reform presage a potentially explosive political struggle. A Senate-House conference committee will be appointed to resolve the differences, with the Clinton administration and the House on one side of the issue and the Senate on the other.

Advocates for the elderly were quick to denounce the Senate plan. “We are shocked and disappointed by the action taken by the Senate today,” said Martha McSteen, president of the National Committee to Preserve Social Security and Medicare.

“The Senate’s means-testing plan will divide Americans based on their income, set senior against senior and put Medicare on a dangerous road toward becoming a welfare program in the eyes of the public instead of a unifying, national endeavor,” said McSteen, whose organization has about 5 million members.

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In 1988, Congress approved a major expansion of Medicare, including unlimited hospital and pharmaceutical coverage, to be financed by a special tax on the affluent elderly. The tax, which would have topped out at $800 a year, sparked a revolt among affluent seniors. Congress repealed the law in 1989 before it could even take effect.

The premium payments approved by the Senate on Tuesday would be far bigger, rising as high as $2,102 for affluent seniors and $4,204 for couples.

More significant than the numbers, however, is the dramatic policy change embodied in the Senate action. The proposal to “means-test” premiums represents a fundamental shift in the basic nature of Medicare, a program that traditionally has provided equal benefits at equal cost to the rich and poor alike.

Only 1.6 million of today’s 38 million Medicare beneficiaries have incomes above $50,000 a year and would be affected if the Senate action becomes law. The change would save an estimated $3.9 billion over five years, a comparatively small amount for a program with annual expenses of $200 billion.

The Senate proposal, if signed into law, would set a clear precedent for linking Medicare premiums to income, with richer beneficiaries paying more for coverage.

The Senate has “done something truly worthy of being remembered,” said Sen. Phil Gramm (R-Texas), a backer of the sliding-scale premium payments as well as the higher eligibility age.

It was a stinging defeat for liberal defenders of the traditional Medicare program, who characterized it as a threat to beneficiaries of the massive health program.

“Batten down your hatches, blue-collar workers, they are coming after you next,” warned Sen. Barbara A. Mikulski (D-Md.).

The Senate approved the income-related premium by a vote of 70 to 30, rejecting a proposal by Sen. Edward M. Kennedy (D-Mass.) to strip the special premium from the budget legislation.

As originally drafted by the Senate Finance Committee, the bill would have imposed the income test on the actual payment of doctor bills. All beneficiaries now pay the first $100 of doctor bills each year, a payment known as a deductible. After the deductible is satisfied, Medicare pays 80% of approved charges.

Under the Finance Committee bill, the deductible would have been linked to income. But the idea was confusing, and had never been fully debated before the committee devised it in several hours of private meetings. “As a consequence of it being untested, we changed it back to a premium,” Sen. Bob Kerrey (D-Neb.) said during Tuesday’s debate.

Medicare’s 38 million beneficiaries--those 65 and over and the disabled of all ages--currently pay $43.80 a month, or $525.60 a year, for the “Part B” insurance that covers doctor bills and other outpatient medical expenses.

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The current premium is intended to recoup 25% of the cost of doctor bills covered by Part B, with general tax revenues covering the remaining 75% of the cost. The Senate proposal is designed to make affluent beneficiaries shoulder a bigger share of the average cost of coverage.

The possibility of imposing an income-related premium was considered earlier this year in preliminary budget talks between the White House and Congress, but was rejected as too controversial, noted Martin Corry, director of federal affairs for the American Assn. of Retired Persons, the largest seniors group, with 32 million members.

If the Senate proposal becomes law, “it is going to be an administrative nightmare, with everybody sending their income information to the Department of Health and Human Services,” which administers Medicare, he noted. The Senate sponsors of the plan want Medicare, rather than the IRS, to keep track of income, so the measure will not be viewed as a tax.

The increase in the eligibility age was approved by a vote of 62 to 38. Under the Senate plan, the eligibility age would begin climbing in the year 2003, in tandem with a similar schedule for Social Security. Both programs would reach a new requirement of 67 in the year 2027 for full benefits.

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In the House, meanwhile, a group of Democratic lawmakers declared their intent Tuesday to push for restoration of supplemental security income benefits to some legal immigrants when the House begins debate today on its version of the budget legislation.

Rep. Xavier Becerra (D-Los Angeles), chairman of the Congressional Hispanic Caucus, said he will seek approval of an amendment designed to provide future benefits to disabled immigrants who would be excluded from SSI under the House legislation.

The welfare reform law signed by Clinton last year made legal immigrants ineligible for SSI benefits, which are paid to low-income elderly and disabled. But the budget agreement struck by Clinton and congressional leaders this year would restore benefits for disabled immigrants who were in the country on Aug. 22, 1996, even if they became disabled in the future.

The House Ways and Means Committee, however, amended the budget bill to exclude future disability cases. Becerra called the change “a breach of faith” with the bipartisan budget accord, and said it would deprive an estimated 75,000 immigrants of SSI benefits.

“We should not discriminate against legal immigrants and we should not differentiate irrationally between legal immigrants, and this agreement does both,” said Rep. Sander Levin (D-Mich.), who called his support of Becerra’s amendment “a matter of conscience.”

Times staff writer Erin Trodden contributed to this story.