Seniors Public Policy: Change Might Be Inevitable... But it Won't Be Easy Although Democrats and Republicans in Congress at the time of this writing (late July) are still ironing out details of a plan to balance the budget by 2002, the politics of reform of the 32-year-old Medicare program illustrate how challenging it is for lawmakers to make seemingly minor policy changes to seniors' health and long-term care programs. The Medicare program was established during Lyndon Johnson's "Great Society" initiative in 1965 to provide medical benefits to all persons 65 years and overl without regard to income. The program consists of two parts: hospital insurance (Part A) and supplemental medical insurance (Part B), which pays for services rendered by individual providers.

In the next few weeks, lawmakers in Washington are expected to finalize work on the budget bill putting into motion programmatic changes for a five-year period. While it is possible that compromises will be reached on the relatively modest, but highly controversial issues discussed below, the challenges facing lawmakers with regard to Medicare and other seniors health and long-term care programs will increase exponentially over the next two decades with the aging of the 75 million post-World War II "baby boomers." The impact of the burgeoning older adult population on government policy can be simply illustrated by considering the following "intermediate" projections2 of the annual operating balance of the Medicare trust fund: 1995 (-$9 billion); 2010 (-$116 billion); 2020 (-$352 billion); 2030 (-$934 billion); and 2040 (-$1,923 billion). Add to the equation other government health and long-term care benefits provided to seniors and you will probably conclude (as I have) that while sweeping policy change may not come easily, it will be inevitable in the years ahead.

THE MEDICARE DEBATE With the Medicare trust fund bordering on insolvency and an expansive budget bill with which to "protect" itself, Congress began work this summer on perhaps the most sweeping changes ever made to the program. Instead of simply cutting payments to medical professionals (the usual legislative fix), in June the U.S. Senate took a bold step by passing legislation that, among other things, would means-test Part B of Medicare and increase the age of eligibility for beneficiaries.

Going into budget reconciliation in July, members of the U.S. House of Representatives, U.S. Senate, and the Clinton Administration all agreed to approximately $115 billion in Medicare savings over the next five years. While substantial savings would come from reductions in reimbursements to physicians, hospitals and health maintenance organizations, budget conferees have actively discussed inclusion of the Senate-approved plan to raise Medicare Part B premiums for affluent seniors.

Means-testing Part B of the Medicare program was not a part of the House spending bill, but was passed in the Senate by a wide bi-partisan vote in their budget legislation. The Senate-approved means-testing plan would require wealthy individuals and couples to pay higher premiums as their incomes increase. A person with an annual income of $55,000, for example, would pay an additional $13.50 per month in 1998, increasing to $19.50 a month in 2002. An individual with an annual income of $100,000 or more would be required to pay an extra $132 a month in 1998, increasing to $195 per month in 2002. Although means testing would effect fewer than two million of the 38 million Medicare beneficiaries, opponents have vociferously characterized this proposal as the first step towards making Medicare a welfare, rather than an entitlement, program. Opponents of means-testing claim public support for the Medicare program would rapidly erode if the program was no longer perceived as an entitlement for all seniors, regardless of income.

With active opposition from a number of labor and seniors organizations, including the American Association of Retired Persons, means testing threatens to bring to bear very real political consequences for policymakers who support such an approach for controlling Medicare's spiraling costs. Many House Republicans, for example, have expressed deep concern they will face Democratic charges of "cutting Medicare" (as they did just over two years ago) if they raise premiums for wealthy seniors. All legislators (Democrats and Republicans alike) also vividly recall former House Ways and Means Committee Chairman Dan Rostenkowski (D-IL) being chased down the street by angry seniors in his North Chicago district in 1988 after Congress increased Medicare premiums to fund a new catastrophic healthcare benefit (which incidentally was repealed that same year by Congress).

Further complicating the debate over means-testing are additional practical and political ramifications related to the administration of the program. Republicans have insisted that the U.S. Department of Health and Human Services (HHS) administer the Medicare means-testing plan. Democrats and the Clinton Administration instead want the Internal Revenue Service (IRS) to compute and collect the increased premiums. The seemingly innocuous issue of programmatic administration has political implications since Republicans fear that with the IRS in charge, the "premium increase" will instead be construed as a "tax increase."

While means-testing may ultimately be resolved with compromise, another current Medicare controversy -- increasing the eligibility age from 65 to 67 -- further illustrates how difficult it is to make seniors-related policy changes. The Senate proposal to increase the age of Medicare eligibility would conform with a congressionally approved increase in eligibility age for Social Security; every year beginning in 2003 the age for participation eligibility would move ahead two months until it reaches age 67 in 2026.

What looks fairly simple on paper (phasing a modest increase in age over a period of 24 years) has actually become every bit as controversial as means-testing. Critics of this proposed change claim that many individuals who either retire early (or are forced out of their jobs) will be unable to afford necessary health insurance until they reach Medicare eligibility. Without additional restructuring of Medicare to allow individuals to buy into the program before they reach the eligibility age, Medicare would remain an "all or nothing" program (unlike Social Security which offers the option of early retirement with diminished benefits).

CONCLUSION The controversies highlighted in this article underscore why modification of public policy related to seniors often proves more difficult than might appear at first blush. Even if policymakers can successfully overhaul the Medicare program between now and 2003, far more fundamental challenges will arise over the next 20 years when 75 million aged "baby boomers" collide head first with a seniors health and long-term care delivery system that is perhaps best characterized as an uncoordinated patchwork of programs.

1) Medicare benefits are also available to persons eligible for Social Security disability programs for over two years and to certain individuals with end stage renal disease.

2) Social Security Administration projections

David S. Schless is executive director of the Washington, D.C.-based American Seniors Housing Association and vice president of the National Multi Housing Council/National Apartment Association Joint Legislative Staff with principal responsibility for issues related to seniors housing.

HCFA head leaves post Bruce Vladeck, head of the Health Care Financing Administration in Washington, D.C., is leaving his position to take a teaching post at Mount Sinai Medical Center. He served four years at HCFA. At presstime, his replacement had not been named.