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THE BUDGET

Proposal Leaves Seniors Relieved

Health care: Big cuts to Medicare, Social Security would be avoided in agreement. But long-term solvency of programs remains challenge.

May 04, 1997|ROBERT A. ROSENBLATT | TIMES STAFF WRITER

WASHINGTON — Advocates for powerful seniors groups expressed relief on Saturday that the historic deal to balance the federal budget will avoid major cuts in their most cherished benefits--Medicare and Social Security.

The huge entitlement programs will provide most of the savings needed to reach a balanced budget by the year 2002. But the changes are far less drastic than the seniors groups had feared just a few days ago.

"Everybody had to sacrifice, and the pain is spread throughout the population. On balance, we are pleased," said Martin Corry, director of federal affairs for the 32-million-member American Assn. of Retired Persons.

"It is a lot better than we heard a couple of days ago," agreed Max Richtman, executive vice president of the National Committee to Preserve Social Security and Medicare, which has 5 million members.

The rescue came at virtually the last minute. And it came from two directions:

First, potential rebels against the evolving deal in both the Democratic and Republican parties sent blunt warnings to President Clinton and Republican leaders in Congress: Don't tamper with the annual cost-of-living increase that guarantees Social Security recipients keep pace with inflation.

Second, the Congressional Budget Office announced that the economy was doing so well that tax revenues over the next five years would be billions of dollars more than expected, making it easier to avoid the deep cuts in Medicare and Social Security that had been feared.

The president and congressional leaders are grinning in triumph. And today's seniors have preserved their benefits.

But the financial fate of tomorrow's seniors--the baby boom generation whose 80 million members begin collecting benefits after 2011--remains an enormous challenge for future presidents and members of Congress. The budget agreement, if it sticks and the economy thrives as predicted, will extend the life of the Medicare hospital trust fund for a decade, but it does nothing about long-range fixes for either Social Security or Medicare.

Under the budget deal, the savings in Medicare--about $115 billion over five years--will come primarily from reductions in the growth of payments to doctors, hospitals and health maintenance organizations treating people enrolled in Medicare.

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Beneficiaries themselves face only a comparatively minor new burden. They will pay higher monthly insurance premiums for Part B of Medicare, which pays for doctor bills. The premium, now $43.80 a month, will increase gradually to approximately $68 in the year 2002. The charge in 2002 under the budget agreement will be about $15 a month higher than scheduled under current law.

The 38 million people enrolled in Medicare--those over 65 and the disabled of all ages--get some sweeteners in the form of expanded benefits: free mammograms for women, free prostate cancer screenings for men and help with diabetes screenings for both sexes.

Meanwhile, the slowdown in spending means Medicare's hospital trust fund, headed for bankruptcy in the year 2001, will have its solvency extended until 2007.

Families of Alzheimer's victims were disappointed because the president dropped his plan for the government to pay for 32 hours a year of respite care, which would give family members occasional time off from the burdens of caring giving.

Medicaid--the federal health program for the poor--spends about 20% of its budget for elderly people in nursing homes. Senior advocates were strongly opposed to calls for a cap on spending for each beneficiary. The idea of a cap was dropped late in the deliberations by budget negotiators for the White House and Congress.

The handling of Social Security, with its 44 million beneficiaries, was particularly sensitive because gargantuan savings seemed attainable through a technical change: An independent commission had said the federal consumer price index overstates inflation by 1.1 percentage points. The index is used both to adjust the annual raise in Social Security, and to set federal income tax brackets.

Trimming the CPI by 1.1 points would yield a gusher of money, a staggering $1.1 trillion in reduced benefits and higher taxes over the next 12 years. After flirting for months with the idea of legislation mandating a lower CPI, the president and Senate Majority Leader Trent Lott (R-Miss.) scuttled the idea.

On the right, Sen. Phil Gramm (R-Texas) was denouncing the idea as a hidden tax increase. On the left, House Minority Leader Richard A. Gephardt (D-Mo.) said that to reduce each senior citizen's Social Security benefits by several thousand dollars would be a betrayal of Democratic Party principles.

The final budget pact left the idea in the hands of the technicians, the economists and statisticians of the federal government who measure inflation. Rather than ordering any reduction, budget negotiators simply put into their calculations an assumption that the consumer price index will be trimmed over the next five years by an estimated 0.3 percentage points.

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