Some Seniors Protest Higher Medicare Tax

WASHINGTON — More than 300 angry people jammed the lawn near the recreation center at Casta del Sol, a retirement community in Mission Viejo, grumbling about the major Medicare expansion enacted this year.

It was not the new benefits they objected to--full Medicare coverage for catastrophic health care costs. It was the financing mechanism--a tax hike of up to $1,696 a year for affluent elderly couples.

Their target was Rep. Ron Packard (R-Carlsbad), who voted for the Medicare measure and had come on a campaign visit. “I heard the message loud and clear,” Packard recalled.

What Packard heard in Casta del Sol, other legislators have been hearing nationwide. Active protest organizations have sprung up in Nevada, New York, Pennsylvania, Illinois, Iowa, Florida and Texas, with the vigorous backing of major groups representing retired federal employees and military officers.

Protest Spells Trouble

And their protest spells trouble not only for the Medicare expansion. At a time of federal budget austerity, Congress is looking to provide new federal services without raising taxes or widening the deficit.

In the Medicare case, Congress turned to the beneficiaries themselves. If the beneficiaries consistently revolt, that will cut off yet another avenue of funds to feed the congressional urge to expand federal services.

That the elderly are rebelling is beyond doubt. Medicare beneficiaries--at least the more affluent ones who will have to bear the brunt of the costs--now have read the fine print of the law that promised them protection from the financial effects of lengthy illnesses. And they do not like what they have found.

“We want to repeal the bill,” insisted Bob Shaffer, a 68-year-old Yorba Linda resident who is leading the movement in Los Angeles and Orange counties.

The financing mechanism “goes against the total philosophy of Medicare and Social Security, which are funded by taxes on all the workers,” Shaffer said. “There should not be a special tax on seniors. Let’s repeal it and start over.”

Recipients Pay Premium

In fact, the elderly already pay directly for a small part of their Medicare benefits. While the income tax and the payroll tax meet about 91% of Medicare’s annual costs, the remaining 9% falls directly on the program’s recipients in the form of a premium for doctor bill benefits.

But the protesters fear the precedent that would result from making beneficiaries pay all the freight for the Medicare expansion.

“Making seniors pay for this is like saying that only people with children will pay school taxes and only veterans will pay for the cost of VA hospitals,” said Ken Hoagland, a spokesman for the 5-million-member National Committee to Preserve Social Security.

Hoagland’s committee, the only major organization of the elderly that opposed enactment of the Medicare expansion, will conduct a meeting in Washington next month for the coalition of protest groups, which includes the Gray Panthers, the National Assn. of Retired Federal Employees, the Retired Officers Assn. and local protest organizations.

Congressional leaders who developed the $6-billion-a-year legislation say that it is a bargain for the great majority of Medicare beneficiaries.

Most to Pay Modest Fee

It offers unlimited days of government-paid hospital care, a cap on spending for doctors’ bills and Medicare coverage of drugs for the first time. For 20 million Medicare beneficiaries, the cost will be a modest $4 a month next year for singles and $8 for couples, rising to $10 for singles and $20 for couples by 1993.

The major financial burden, however, will be borne by the estimated 13 million persons over age 65 who have enough income to pay federal taxes. These will pay a special surtax that, according to the Congressional Budget Office, will average $285 next year, rising to $506 by 1993.

About 1.5 million persons will pay the maximum surtax--$800 a year for single persons with incomes of at least $45,000 a year or more, and $1,600 for couples with incomes of $90,000 or more. The tax will be paid for the first time in April, 1990, when Medicare beneficiaries prepare their federal taxes for income earned during 1989.

Despite the mounting protest against the financial burden, congressional leaders say there is no chance of repealing or changing the new law, which cleared Congress last June by 86 to 11 in the Senate and 328 to 72 in the House.

“We’ve got 37 million people with no health insurance at all, and 27 million of them are working,” said Rep. Pete Stark (D-Oakland), chairman of the House Ways and Means subcommittee on health, which prepared the bill.

Predicts Conflict

“What do seniors want me to do,” he asked, “kick up the taxes on working people? If I start taxing them 2% or 3% more and give them no benefits while providing more benefits for seniors, it will start a class war.”

Stark thinks that many of the protesters are simply selfish. When he addressed a group of retirees in Woodland Hills, he said, “they booed, they yelled and they screamed. Most of them feel their richness is a result of some kind of superior genetic background and anybody who is poor should suffer the consequences.”

For most people, Stark insisted, the Medicare expansion is “a hell of a bargain.”

‘Peace of Mind’

The chief Senate sponsor, Finance Committee Chairman Lloyd Bentsen (D-Tex.), agrees.

The new law “will provide peace of mind to millions of older Americans and their friends and relatives,” he said. “It doesn’t make sense to talk about changing the law before it even goes into effect.

“Yes, it’s true that only those who benefit from this new catastrophic Medicare insurance will pay for it. It’s also true that those who don’t develop a costly illness won’t receive any benefits, just like people with fire insurance don’t get benefits if their house doesn’t burn down.”

Cut Insurance Costs

The congressional committees also point out that the new program will drive down the cost of private “medigap” insurance, which pays for medical expenses not covered by Medicare. The staffs estimate an average savings of $175 a year by 1992 for those elderly who purchase such insurance.

Regardless, opponents insist that the burden is not worth the benefit.

“There’s a significant need to go back and do a cleanup of the legislation,” said Rep. Packard, whose district encompassing southern Orange County and northern San Diego County has significant numbers of retirees who will pay the special supplemental premium.

“This is by far the most dramatic issue for seniors,” he said. “They’ve been calling me and writing me. If every member of Congress got the same response I’ve been getting, then something may be done.”

But Packard has run into a stone wall when he has urged the House Ways and Means Committee to alter the law. He and other Republicans pushing the issue have scant

chance of success in a Congress with heavy Democratic majorities in both the House and the Senate.

“If it’s viewed as a partisan issue, it won’t go anywhere,” said Hoagland, of the National Committee to Preserve Social Security and Medicare. “The key question is whether Democrats will get involved. But people must admit they made a mistake, and that’s very hard for Congress to do.”

Lobby Not United

Nor is the elderly lobby united in its effort to change the law. The 28-million-member American Assn. of Retired Persons, the lobby’s powerhouse, fought hard for the bill’s enactment and is determined to preserve it.

In an extraordinary selling campaign, the AARP has trained 15 or 20 volunteers in each of its 10 regional districts to deliver the message at meetings, clubs and senior centers that the Medicare legislation is a good deal. The group has also prepared a videotape on the topic and bombarded its membership with mailings.

Explaining New Law

“Many people are uninformed about what is in the new law,” said Martin Corry, AARP director of federal affairs. “What they may have heard about is only the financing. By the time they leave the meeting, they understand the benefits and are supportive.”

Opponents of the legislation are “stirring the pot and playing on fears,” Corry said. “We can’t just sit there and let folks spread the trash.”

Despite intense debate and opposition within its own professional staff, the organization decided to push for the new financing burden on seniors. Now it is feeling the backlash. In Sherman Oaks, for example, AARP members are circulating petitions calling for the removal of the AARP executive board.

Corry dismisses the opposition as limited to “pockets in California and Nevada.” Congressional backers of the new program are confident that they can preserve it.

“Everyone who has to pay a nickel complains,” Stark said. “I remember my parents complained when they had to start paying Social Security taxes. Now my mother doesn’t say a peep unless the checks are late.”

THE NEW LAW

The key provisions, and their effective dates, of the 1988 legislation expanding the Medicare program.

1989 -- Medicare beneficiaries pay $564 for first day of hospital care and then receive unlimited free care. Current law requires patients to pay $540 for the first day and $135 a day after the 60th day.

1990 -- Medicare patients pay 20% of doctors’ charges, but when they have paid $1,370 of their own money, Medicare pays all additional bills. (For doctors who charge more than Medicare-approved rates, patients pay the balance.) Under current law, beneficiaries pay 20% of doctors’ bills without limit.

1990 -- Medicare pays for respite care for the first time. The government finances up to 80 hours a year of care for ill persons so that families can have some time off.

1990 -- Medicare recipients can get home health care benefits for as long as 38 consecutive weeks. Under current law, the limit in most cases is three weeks.

1990 -- Medicare for the first time pays up to $50 for routine mammography.

1991 -- After beneficiaries have paid for $600 a year in drug costs, Medicare pays for half of the balance. Medicare now provides no drug coverage.

WHAT THE BENEFITS COST

The elderly will pay the full cost of their expanded Medicare coverage. Starting in 1989, all single persons will pay an additional $4 a month--$48 a year--toward their insurance for doctors’ bills. Couples will pay $8 a month, or $96 a year. In addition, elderly who pay income taxes will pay an extra surtax of about 15%, up to a maximum surtax of $800 for single taxpayers and $1,600 for couples.

The following table shows the extra payments that will be required of single persons and couples with average sources of income and tax deductions.

Single Person Couples Income Basic Medicare Basic Medicare income tax premium income tax premium 10,000 $0 48 0 96 20,000 1,278 228 225 119 30,000 2,726 453 1,575 321 40,000 4,938 768 2,925 524 50,000 NA 848 4,275 726 60,000 NA 848 6,308 1,041 70,000 NA 848 8,478 1,356 80,000 NA 848 10,648 1,671 90,000 NA 848 12,818 1,696

NA: not available

Source: American Assn. of Retired Persons