Statement of Administration Policy: H.R. 2470 - Medicare Catastrophic Protection Act of 1987

(House)
(Reps. Stark (D) California, Gradison (R) Ohio, and Waxman (D) California)

The President continues to support legislation providing for acute care, catastrophic illness protection for the elderly through the Medicare program. This protection must be self-financed, actuarially sound, and affordable for Medicare beneficiaries. Unfortunately, the President's call for this catastrophic protection is being used by some as a vehicle for expanding coverage unrelated to his goal, driving up premiums and taxes for middle income Medicare beneficiaries and placing the financial solvency of the trust funds at great risk.

The President's senior advisors will recommend a veto of H.R. 2470, if the following concerns are not addressed satisfactorily:

— a staggering long-term tax increase on the middle income elderly and disabled. The use of this complicated and unnecessary surtax in the income tax code would substantially increase the tax burden and filing complexity for the nation's social security recipients.

— an excessive surtax and premium increase that on average would add over 150 percent — $420 — to the current law 1989 annual premium of $280 per enrollee. By the year 2000, the estimated annual payment increase necessary to finance the bill's benefits would be in excess of $1,200 for each Medicare enrollee.

— a Medicare outpatient prescription drug amendment. The drug benefit is a prohibitively expensive Medicare expansion unrelated to financial catastrophes, with an estimated first year cost of $5.8 billion.

— additional expansions of Medicare beyond acute care catastrophic coverage. For example, the addition of a respite (in-home) care benefit and the expansions of skilled nursing facility and outpatient mental health coverage will cause out-year costs to increase substantially.

— other changes unrelated to acute care protection such as requiring the States to pay Medicare deductibles, premiums, and copayments for elderly not now covered.

The Departments of Health and Human Services and Treasury project the annual costs of the House bill's massive Medicare expansions would soon exceed revenues, producing an annual shortfall of $2 billion by 1995. By the year 2005, the total cost of the bill would be nearly $100 billion, adding $20 billion to the deficit in that year alone. Such shortfalls further threaten the future solvency of the Medicare trust funds.