Critics Say Clinton Plan Would Fatten, Not Prolong, Medicare

WASHINGTON — President Clinton’s proposal to prolong the financial solvency of the government’s health care program for the elderly would put huge amounts of new money into the Medicare system but would do nothing to assure its viability for the long term, critics said Wednesday.

The president’s proposal, which would commit $650 billion to $750 billion in budget surpluses over the next 15 years to Medicare, the government’s health care program for 38 million elderly and disabled people, also contemplates expanding the program to cover a costly new benefit: prescription drugs.

Critics immediately took aim at the plan.

“The president is facing a system that is going bankrupt and he offers more benefits--he can’t control himself,” said Rep. William M. Thomas (R-Bakersfield), co-chairman of the Bipartisan Commission on the Future of Medicare.

Prescription Drugs Would Add to Cost

Adding prescription drugs to Medicare’s benefits would make the program much more expensive over the long term. A limited prescription drug plan of the type offered by many managed-care organizations would cost the government about $20 billion a year, according to recent government estimates. Under that scenario, beneficiaries would also have to shoulder a part of the cost.

Still, Clinton’s proposal was welcomed by health care providers and advocates for the elderly, as well as by some economists who said it sends a clear signal that the nation puts priority on caring for its aging population.

“This is really signaling that you can’t just play with the current Medicare program without thinking about whether it meets people’s needs in terms of benefits and without acknowledging that it needs an infusion of resources,” said Marilyn Moon, a trustee of the Medicare Trust Fund.

Clinton’s proposal comes as Congress and the bipartisan commission are wrestling with how to make the Medicare program sustainable over the long term. The commission is close to a stalemate over how to resolve differences, with some members reluctant to make major changes in the program and others pushing to sharply reduce growth in government spending for Medicare.

The difficulty of making the program viable has been compounded because a rapidly growing portion of the population is elderly and relies on the program to pay for its health care. Making it even more costly is the proliferation of sophisticated health care technology, which encourages doctors to offer expensive treatments more frequently.

If current rates of spending growth continue, the amount spent on individuals 65 and older will equal $25,000 a person in 2020, compared with $9,200 in 1995, according to a study in Health Affairs magazine by economist Victor Fuchs. At that rate of growth, 10% of the nation’s entire output of goods and services would be spent on health care for older Americans, a dramatic jump from just over 4% in 1995.

For months, the commission primarily has examined ways to cap the government’s spending on Medicare by making the program into a defined contribution plan. Under such a scenario, the government would pay for most of the cost of an average insurance plan. If beneficiaries wanted additional coverage they would pay more.

Now Clinton has altered the debate by proposing to put more money into the program, which appears to lessen the immediate need to reduce benefits or raise payroll taxes.

“The president has said, ‘I’m giving some revenues; you guys come up with reforms,’ ” said Sen. John B. Breaux (D-La.), the other co-chairman of the commission.

“But we have to make it better,” he said. “Just putting in more money is not the answer. Medicare is a 1965 model. If you put more gas into a 1965-model car, that does not make it run better. We have to move toward a new type of delivery system.”

Clinton’s plan, in effect, commits large amounts of additional taxpayer dollars to Medicare--making the system much more dependent on general tax revenue.

Medicare traditionally has been financed with a combination of payroll tax revenue (with workers and employers each paying 1.45% of salaries), general tax revenue and premiums paid by beneficiaries.

Echoing the views of many conservative Republicans, Sen. Phil Gramm (R-Texas), a member of the commission, said he opposes putting general revenue into the Medicare system.

Still, it seems highly likely that, offered the chance to delay a politically charged debate about changing a popular program, Congress would take the money and put off hard choices for another day.

Dampening the Zeal to Restructure

“The fact is that anything that pushes off the date of insolvency is going to dampen the zeal to restructure the program,” said Robert D. Reischauer, an economist and senior fellow at the Brookings Institution. And that would make restructuring that much more difficult, since the number of Americans getting Medicare benefits will only increase. “It’s easier to change the program or begin having a rational debate about it” before the number of beneficiaries increases dramatically, Reischauer said.

Moreover, the possibility of adding prescription drug coverage is likely to appeal to lawmakers.

“You have this budget surplus on the one hand, and you have on the other hand, staring at this president, a really crying need for prescription drug coverage,” said Uwe Reinhardt, an economics professor at Princeton University.

“He is saying there is a chronically ill old American who cannot afford prescription drugs, and we can help her. It’s a very serious non-cynical proposal, in my view,” said Reinhardt.