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Clinton Ponders Concessions on Medicare, Taxes

By Clay Chandler and Peter Baker
Washington Post Staff Writers
Thursday, January 9, 1997; Page A04

With just days until his budget plan is locked in place, President Clinton is still contemplating fiscal concessions to congressional Republicans amid signs that the two sides may be able to meet halfway on contentious issues such as taxes and Medicare.

Although most major decisions on the fiscal 1998 proposal have already been made, aides said Clinton may reconsider some of those choices before the final pieces of the plan go to the printer by the end of the week.

"The president has settled on the larger questions, but we are in an environment where there might be a whiff of opportunity that comes our way," said one senior White House official who declined to be identified. Clinton "gave some broad instructions" to administration budget-writers "about how to proceed," the official added, "but he has left the window open a crack. At some point, though, these will become the final numbers."

One of the most delicate areas that could be reopened, officials said, is Medicare, a prime source of partisan conflict that exploded into the government-closing budget showdown a year ago and provided fodder for Clinton's campaign attacks on the GOP Congress last fall.

In recent weeks, several influential Clinton advisers, including Treasury Secretary Robert E. Rubin and newly appointed National Economic Council Director Gene Sperling, have urged the president to propose higher Medicare premiums for upper-income taxpayers in his budget, sources said.

Aside from the merits of the plan, some officials thought it might be seen as an olive branch to Republicans, who advocated limits for wealthier Medicare patients in the balanced-budget plan Clinton vetoed in 1995. But for the moment, aides said, Clinton has opted against such a move and instructed the Office of Management and Budget to draft his budget accordingly.

The debate over Medicare premiums illustrates the larger dispute among Clinton's advisers about budgetary tactics after the election. While a faction led by OMB Director Franklin D. Raines has pressed for a plan that reflects at least some Republican priorities, another group led by chief congressional lobbyist John L. Hilley has been largely successful in resisting major giveaways.

Clinton is not waiting for a response from Congress before making any last-minute budgetary decisions, a senior official said yesterday. However, the White House has been encouraged by the political semaphore coming from Capitol Hill.

As a gesture of goodwill, the congressional leadership agreed yesterday to Clinton's request for a delay in sending his final budget proposal up to Capitol Hill. Under the schedule announced yesterday, Clinton will submit it Feb. 6, three days later than originally slated, so that it will not become public until after his State of the Union address, now set for Feb. 4.

Clinton has been in close contact lately with Senate Majority Leader Trent Lott (R-Miss.), who in the last couple of days has spoken optimistically about the prospects of a budget deal.

At a news conference Tuesday, Lott spoke favorably of Clinton's tax-cutting package aimed at families with children and college students, although he also made clear that he wants estate tax relief and a bigger capital gains tax cut than the president favors. And in a speech yesterday to the U.S. Chamber of Commerce, Lott hinted at the give-and-take nature of his conversations with Clinton.

"He's indicated, `Well, I could maybe agree with you on that if you could change it a little bit here and there.' And maybe we can," Lott said.

"The president has said he wants to work with us," Lott added. "He's moved in our direction in his rhetoric," raising hopes that substantive agreements on policy will follow.

On tax relief, another major battleground a year ago, the two sides appear to start this year divided not so much over how much to cut as how to do it. Clinton's package reportedly will cost $100 billion over five years, while in his speech, Lott suggested Senate Republicans were looking for cuts in the range of $124 billion to $150 billion.

There is still plenty of room for disagreement in other areas, though. In recent weeks, congressional Republicans have stepped up their objections to a Clinton plan to extend the life of the Medicare hospital trust fund by shifting home health care costs to another part of the budget. Lott yesterday called the proposal a "shell game" and House Ways and Means Committee Chairman Bill Archer (R-Tex.) has dismissed it as a "gimmick."

Under the Clinton plan, about $55 billion in costs for home health care over the next five years would be transferred to a Medicare trust fund that covers doctor bills. Unlike the hospital trust fund, which is financed by a dedicated payroll tax, the doctor trust fund has unlimited access to general revenue.

The administration is also considering a plan to change the formula that determines the premiums Medicare pays to health maintenance organizations in different parts of the country. Many experts think the current formula produces premiums that are far too high in some urban areas but too low in many rural areas.

As for the contemplated Medicare premium increases on the wealthy, it's far from clear that that idea would be enough to mollify GOP leaders still stinging from Clinton's campaign rhetoric.

Archer spokesman Ari Fleischer said yesterday that Republicans are wary of such an increase if it is presented as a nod to GOP legislators, rather than an initiative supported by the president.

"Nobody here would see an increase in premiums as a goodwill gesture," Fleischer said. "We'll obviously consider whatever they propose, but our main point is that the president shouldn't be monkeying around with home health care."

Staff writers Helen Dewar and Spencer Rich contributed to this report.

© Copyright 1997 The Washington Post Company

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