Clinton Now Favors Medicare Means-Testing

In a surprising shift, the Clinton administration has decided to support passage this year of legislation requiring affluent seniors to pay significantly higher premiums for Medicare coverage, officials said Thursday.

Despite initial reservations, President Clinton now favors a controversial Senate proposal to raise Medicare’s monthly premiums for individuals with annual incomes above $50,000 and couples with incomes above $75,000.

Under the Senate plan, the monthly premiums would rise from the current $43.80 to as much as $180.40 for affluent seniors. Clinton supports an increase but wants to limit the maximum monthly premium to about $135, White House officials said.

But the president opposes a companion Senate proposal to raise Medicare’s eligibility age, now 65, to 67 by the year 2027. The White House fears that early retirees might be unable to obtain affordable health insurance on the private market if the eligibility age is raised.

The “means-tested” premiums, if approved, would represent a fundamental change in the underlying philosophy of the giant health program for the elderly, and it is creating bitter divisions within Democratic leadership circles.

*

House Minority Leader Richard A. Gephardt (D-Mo.) is strongly opposed to the concept of income-linked premiums. He will join with senior citizens groups today in a lobbying campaign to head off the means-testing and eligibility age proposals.

Linking premiums to income “would be an erosion of the most fundamental principle of Medicare, a social insurance program . . . where everybody pays and everybody gets,” said Laura Nichols, a Gephardt spokeswoman.

The fate of the Medicare proposals will be decided in a House-Senate conference committee that began work Thursday on legislation to balance the federal budget within five years. Medicare is a key element of the balanced-budget deal between Clinton and the Republicans: About $115 billion in savings would come from reductions in the future growth of the health program.

The House passed a version of the budget legislation containing only the $115 billion in savings. The Senate approved the spending reductions as well but added two unexpected structural reforms: the income-linked premium and the higher eligibility age for the baby-boom generation.

The initial reaction from the White House was that both issues would be better addressed next year or in 1999 by a bipartisan commission assigned to deal with the long-range solvency of Medicare.

But the president changed his mind after it became clear that the Senate was enthusiastic in its support of the idea, according to administration officials. “I have never been opposed to means-testing Medicare,” the president said at a news conference Wednesday in Madrid.

The White House is willing to accept the Senate proposal as part of this year’s budget process, although it is proposing modifications to reduce the maximum dollar amount that wealthy seniors would pay and to have the paperwork handled by the Internal Revenue Service rather than the Medicare system.

Only an estimated 4 million of Medicare’s 38 million beneficiaries would be required to pay higher premiums if the Senate plan becomes law. Even so, it would represent a striking philosophical shift for the massive federal health program, which covers all Americans over age 65 and the disabled of all ages.

Currently, all beneficiaries, rich or poor, pay the same $43.80 monthly premium for the “Part B” coverage that reimburses doctor bills and other out-of-hospital expenses. Under existing law, the premium will rise to $45.10 next year.

The Senate proposal would require affluent seniors to pay significantly higher premiums, based on a sliding scale linked to their income. At $55,000, for example, an individual would pay $58.10 monthly. The premium would rise to a maximum of $180.40 a month for individuals making $100,000 and couples making $125,000.

*

The administration wants to limit the maximum monthly premium to $135. It fears the higher premiums endorsed by the Senate could cause “close to a half a million” affluent people to drop out of Medicare and buy private coverage, White House officials said. “You might create incentives for well-to-do healthy beneficiaries to opt out of the program,” said one administration official.

The means-tested premiums would generate about $4 billion in additional revenue over five years, a small portion of the $115 billion in Medicare savings contained in the balanced-budget legislation.

While the dollar amount is relatively insignificant, the political impact is substantial. The growing support for means-testing suggests that the White House and Congress are more willing now than in the past to take unpopular steps to deal with the future of Medicare, which consumes $200 billion of the $1.5-trillion federal budget.

Opposition already is mounting among senior citizens. “Medicare Measure Takes Wrong Turn,” declares the July-August bulletin mailed to the 32 million members of the American Assn. of Retired Persons, the biggest of the influential senior lobbying groups. AARP Executive Director Horace Deets called the Senate plan “discriminatory means testing.”

*

In 1988, Congress passed an expansion of Medicare benefits, including unlimited days of hospital care and pharmaceutical coverage, financed by a special income-linked premium. An explosive protest by seniors forced Congress to repeal the bill a year later.

The battle will be fought again if the House-Senate conference adopts the premium, predicted Max Richtman, executive vice president of the National Committee to Preserve Social Security and Medicare, which led the opposition in 1988.

“I don’t think the issue will end with a vote by the conference committee or a vote by the full House and Senate,” said Richtman. “This will not be the end of the debate. We will try to change it.”

The White House, however, has become convinced that the political atmosphere is different, and that an income-related premium will be acceptable to the public at large as well as a majority in both houses of Congress.

On the eligibility age issue, Senate advocates of the increase refused Thursday to give up despite the resolute opposition of the administration and the House.

“The time to act on these reforms is now,” Clinton was advised in a letter signed by Sens. Bob Graham, a Democrat, and Connie Mack, a Republican, who represent the retiree-rich state of Florida. They were joined by Sens. Bill Frist (R-Tenn.), John H. Chafee (R-R.I.), Bob Kerrey (D-Neb.), and John B. Breaux (D-La.)

Times staff writer Edwin Chen contributed to this story.