Support widens for charging wealthy more for Medicare

Seeking to prevent cuts in program, Democrats now open to GOP plans

October 06, 2003|By NEW YORK TIMES NEWS SERVICE

WASHINGTON - With unexpected support from some Democrats, Republican negotiators from the House and the Senate say they are seriously considering a change in Medicare that would require high-income elderly people to pay higher premiums than other beneficiaries.

The discussions come as the negotiators increase their efforts to reach agreement by Oct. 17 on a bill to overhaul Medicare and add prescription drug benefits to the program.

The proposal to link premiums to income raises a huge philosophical and political question: Should wealthy people pay more for Medicare?

Republicans such as Sen. Don Nickles of Oklahoma say such a requirement is a sensible, progressive way to slow the growth of federal Medicare spending. The Senate majority leader, Bill Frist of Tennessee, said the Medicare negotiators had "a mandate" to charge affluent people more.

In the past, Democrats have vehemently opposed the idea. But some of the social policy experts most respected by liberal Democrats now say they are receptive to it as a way to avert cuts in Medicare and other domestic programs. Pressure for such cuts will increase, they say, as budget deficits grow and baby boomers cash in their claims to Medicare and Social Security.

Most of the 40 million Medicare beneficiaries now pay the same premium - $58.70 a month, or about $704 a year - for doctors' services and other outpatient care.

Under one proposal being discussed by House and Senate negotiators, premiums would rise gradually with a beneficiary's income. The change would affect only people with annual incomes above a certain level, perhaps $75,000 or $100,000. People with incomes exceeding $200,000 could see their premiums triple, to about $2,100 a year.

Some - including the AARP, the lobbying group for older Americans; labor unions, such as the United Automobile Workers; and some liberal Democrats, including Sen. Edward M. Kennedy of Massachusetts - say that levying an extra charge on affluent beneficiaries would undermine the universal nature of Medicare. Such a change, they say, would be a dangerous precedent, a first step in turning Medicare from a universal social insurance program into a welfare program.

But Robert M. Ball, who worked at the Social Security Administration for three decades and was commissioner from 1962 to 1973, said: "I don't see an objection to having an income-related premium. I am opposed to varying Medicare benefits according to the income of the recipient, but I find it completely acceptable to have people with higher incomes pay more for those benefits."

Robert Greenstein, executive director of the Center on Budget and Policy Priorities, a liberal-leaning research and advocacy group, and Robert D. Reischauer, president of the Urban Institute, a research organization, said they favored the idea of linking Medicare premiums to income.

"This is one of the most reasonable, most justifiable, least painful changes you could make," Greenstein said. "It does not do violence to Medicare as a program that provides the same coverage and benefits to everyone."

Reischauer, a former director of the Congressional Budget Office, said that "asking upper-income elderly people to pay a little more" was fairer than some of the alternatives: raising payroll taxes, increasing Medicare premiums for all beneficiaries and cutting benefits.

The Senate bill does not include any kind of so-called means test, though the Senate did show support for the idea in a test vote on a proposal to increase the basic Medicare premium for affluent elderly people.

"High-income beneficiaries can afford to pay a larger share of Medicare's costs," said Sen. Dianne Feinstein, a California Democrat.

Feinstein, who offered the proposal, said it would affect about 2 percent of beneficiaries: people with incomes exceeding $100,000 a year and couples with incomes of more than $200,000.

The House endorsed a more complicated plan that would require affluent beneficiaries to spend more of their money before they could get Medicare coverage for catastrophic drug costs.

"I do not believe that someone with a $200,000 income living in a gated community should have exactly the same subsidy as someone struggling along on $25,000 or $30,000 of income," said Rep. Nancy L. Johnson, a Connecticut Republican who is the chairwoman of the House Ways and Means Committee's Subcommittee on Health.

In 1997, the Senate voted 70-30 to charge higher premiums to affluent beneficiaries. The proposal did not become law, but it did win support from 21 Democratic senators, including John B. Breaux of Louisiana, Bob Graham of Florida and Max Baucus of Montana. Breaux and Baucus are members of the conference committee now working on the Medicare bill.

Republicans say it is strange that Democrats such as Kennedy, who want to impose higher income taxes on millionaires, refuse to impose higher Medicare premiums on wealthy retirees.

Kennedy said he feared that an increase in premiums would prompt high-income people to leave Medicare, raising costs for those who remain in the program. Some Democrats also make an argument based on social solidarity: If affluent people have to pay more, their political support for the Medicare program will erode.

Higher-income workers pay more into Medicare than other people. The Medicare payroll tax is levied at the same percentage rate regardless of a person's income, and there is no ceiling on the amount of earnings subject to the tax.

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