Surtax

A coalition of influential congressional Democrats, senior citizens groups and labor unions Wednesday proposed a tax increase for the wealthiest 1% of Americans to replace the controversial surtax included in Medicare's catastrophic care program. The proposal indicates that the rebellion against the financing method for catastrophic care, which makes Medicare recipients pay the full cost of their new benefit, is making deeper inroads in Congress. The latest call for a drastic change came from Democratic Sens.

Sen. Lloyd Bentsen (D-Tex.) knows that statistics are strange and changeable things. When he was writing a law several years ago to provide an insurance fund for workers' pensions, government experts told him that an annual premium of 50 cents per worker would be enough. Let's double it to be sure, Bentsen said, and the premium was set at $1 a year. Today, the pension insurance system costs $16 a year for each worker, Bentsen said the other day, laughing at the memory of how wrong the actuaries can be. But now this same Lloyd Bentsen is making a big political bet that the experts have guessed right in figuring the cost of Medicare's catastrophic-illness program, which offers beneficiaries unlimited days of hospital care and coverage of prescription drugs.

Re "MWD may cut water to area cities," Jan. 7 What about building desalinization plants paid for by a surtax on water use? Stanley Marcus Encino

Sen. Bentsen claims that the complaints about his Catastrophic Tax Act come from "wealthier people who . . . want to be subsidized by the rest of the taxpayers." Not at all. As usual, it's the middle class who are not happy about subsidizing both the poor and the rich. This surtax on the elderly begins with people who make only about $14,000 a year. It goes up to about $45,000 a year and then stops. Above that level, thanks to the cap, as your income increases your surtax rate decreases.

Despite an outcry from many older Americans, the Health and Human Services Department urged Congress on Thursday not to roll back the surtax that helps finance catastrophic health insurance for retirees. Although preliminary estimates show that the tax is bringing in more revenue than had been expected, Secretary Louis W. Sullivan told the Senate Finance Committee that the added revenue is not likely to continue once a new prescription drug benefit goes into effect in 1991. "More harm can be done by being overly optimistic about the financing of these new benefits than by being prudently cautious," Sullivan said.

Martin and Kathleen Feldstein are probably right that tax avoidance will be the response to President Clinton's proposal to increase rates on the rich and near-rich (Column Right, March 21) and that the result will be a substantial reduction in anticipated revenue to lower the deficit. More than one-half the revenue from personal and corporate income taxes goes to pay interest on the national debt. As deficits continue and without new growth, interest payments increase and there is less revenue available to pay for bills.

Treasury Secretary Nicholas F. Brady on Thursday rejected a proposal to reduce Medicare catastrophic health insurance premiums that congressional analysts expect will generate a bigger surplus than is needed. Brady, in a letter to Sen. Lloyd Bentsen (D-Tex.), said the insurance program "is literally in its first few months of life" and the Bush Administration wants to be sure it is not left with insufficient reserves. The new insurance program, approved by Congress last year, provides extended coverage for the costs of hospital and medical care and drug benefits.

A coalition of senior citizens groups and labor unions representing 18 million persons is launching a major lobbying campaign to delay the controversial surtax included in Medicare's catastrophic care program. The protest move is directed at getting action beyond Texas Sen. Lloyd Bentsen's proposal to reduce the surtax by 16%. "That's a quick fix, and it's not the answer," George Hennrikus, co-chairman of the Coalition for Affordable Health Care, said Friday. "We're going to push for a delay for a year so proper investigation of the whole issue can be made by experts."

H.T. Steve Morrissey (letter, May 29) comments upon the costs of the recently enacted Medicare Catastrophic Health Care plan. After summarizing these costs, he asks why the elderly should pay for such items as schools, aid to children, and the catastrophic insurance when they will never use them. I would ask him to compare the elderly paying the Medicare Catastrophic surtax with the situation of a worker today. The seniors' maximum surtax is only $1,600, and this would be paid only by a couple with taxable (not gross)