Budget negotiations focus on Medicare HD: Better-off recipients would pay more

September 12, 1990|By Peter Osterlund | Peter Osterlund,Washington Bureau of The Sun

WASHINGTON -- White House officials and congressional leaders inched closer to a budget deficit deal yesterday, tentatively agreeing to a Republican plan to trim billions off the federal deficit by making Medicare premiums more expensive for better-off beneficiaries.

According to a Republican official close to the talks, the plan would lop $18 billion to $30 billion from the government's shortfall over five years by adjusting the size of the Medicare premium based on an individual's ability to pay.

Participating officials said the two sides had also tentatively agreed to increase taxes and fees by $25 billion next year and $130 billion over five years. Similarly, the $303 billion defense budget would be cut by approximately $10 billion over the next year and $170 billion to $200 billion over the next five years, while resulting savings in interest payments on the national debt would amount to $2 billion next year and $70 billion over five years.

At present, all Medicare recipients pay $28.60 a month for coverage of doctors' bills, which covers about one-fourth of the government's cost for the program. Under the plan, presented by Sen. Phil Gramm, R-Texas, that amount would be adjusted based on income.

At the top level, the Republican official said, individuals earning $40,000 and couples making $51,200 a year would pay monthly premiums close to $200.

Democrats incorporated Mr. Gramm's Medicare proposal into a comprehensive plan they offered yesterday in the fifth day of closed-door negotiations at Andrews Air Force Base. The negotiators were expected to continue their work until agreement is reached on a plan to cut the deficit by $50 billion in the coming fiscal year and by $500 billion over the next five years.

Still uncertain was whether that agreement would come in time to avoid automatic budget cuts as ordered by the Gramm-Rudman budget law. If there is no agreement on a package of spending cuts by the start of the new fiscal year Oct. 1, the Gramm-Rudman law is supposed to whack more than $100 billion out of the federal government's $1.2 trillion budget.

With that threat as stimulus, the negotiators settled down at the bargaining table in May. But after 84 days, the bargainers were able only to agree on the size of the contemplated deficit-reduction package. As a last-gasp effort toward reaching an agreement, the negotiators left for Andrews, 10 miles from the distractions of Washington.

"The differences are so vast, and they remain such," Representative Bill Frenzel of Minnesota, top-ranking Republican on the House Budget Committee, said yesterday. "We've got a lot of work to do."

The budget negotiators have, however, narrowed the differences between them since the latest round of talks began Friday.

"I cannot predict, nor can anyone, when the budget agreement will be concluded," said House Speaker Thomas S. Foley, D-Wash., "but I remain convinced that there will be a budget summit agreement and [it] will be concluded in time to meet the requirements of the Gramm-Rudman law."

Negotiators have agreed that benefit programs such as Medicare and such general government efforts as road- and bridge-building, anti-crime measures and environmental efforts are headed for an $11 billion trim next year.

After that, however, consensus disintegrates, with Republicans calling for cuts as high as $124 billion over five years and Democrats holding out for reductions as low as $90 billion.

The bargainers have also yet to grapple seriously with the type of taxes to be raised.

In yesterday's proposal, Democrats at least temporarily abandoned a long-standing effort to raise the tax rate levied on the highest-income earners to 33 percent, bowing to long-standing Republican opposition. In its place, however, they proposed a 20 percent surtax on incomes over $500,000 a year.

Republicans have also tentatively accepted Democratic demands for a 10 percent surtax on high-priced luxury items such as furs, jewels and expensive entertainment equipment. They also have agreed to support some form of tax on energy.

In the Democrats' proposal, a new 7-cent-a-gallon tax would be levied on gasoline, and a 4 percent tax on all forms of energy would increase gasoline taxes by an additional 4 cents a gallon.

GOP negotiators, however, are still pressing for a cut in the capital gains rate, something resisted by Democratic leaders, who contend that it would be a windfall for the rich.

Participants in the negotiations stressed the tentative nature of all their agreements, in part because any deal must be supported by a majority of the congressional rank and file.

Never, for example, has the size of the Medicare premium been based on one's ability to pay. The plan to raise those fees for better-off beneficiaries has raised fears that it could trigger the sort of popular opposition that last year killed the Medicare catastrophic health insurance program, which forced better-off recipients to pay more for protection from the costs of financially devastating illnesses.

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