By Judith Havemann and Helen Dewar
Washington Post Staff Writers
Wednesday, January 7, 1998; Page A01

President Clinton yesterday proposed the largest expansion of Medicare in a quarter century, offering early retirees at age 62 and displaced workers as young as 55 the opportunity to buy coverage under the government's health care program for the elderly.

The plan, which must be approved by Congress, is designed to make health insurance available to millions of potential retirees age 62 to 65 and another 700,000 dislocated workers 55 and older who either can't afford or lack access to comprehensive health care.

In order to receive the Medicare benefits, the early retirees would be required to pay a premium of roughly $300 a month, and for those who involuntarily lose their jobs the tab would be $400. In part because of the costs, the administration estimates that only about 300,000 of the millions who would be eligible will actually take advantage of the offer.

A separate component of the proposal would target people who retired early but were left uninsured when employers reneged on promises to provide them health insurance. This group would be offered the opportunity to buy insurance from their former employers until they are old enough to qualify for Medicare.

According to administration officials and others, the initiative is designed to reach a group of Americans twice as likely to have health problems as others, and that ranks second only to children in the percentage who lack insurance. Clinton's Medicare proposal is part of a broader plan to reinvigorate his domestic agenda with new initiatives in the budget he will present to Congress next month. At the White House today, Clinton will propose tax credits to help working parents pay for child care; the proposals would cost about $20 billion over five years, administration officials said.

Prominent Republicans and many business leaders immediately criticized yesterday's Medicare initiative as fiscally imprudent at a time when the long-term solvency of the entire Medicare system is in jeopardy.

"It makes no sense to expand this entitlement program," said Neil Trautwein, manager of health care policy at the U.S. Chamber of Commerce, "when there are substantial threats on the table to both Medicare and Social Security" as a result of the coming retirement of the baby boom generation.

"When your mother is on the Titanic and it's sinking, your first preoccupation ought not to be getting more people on the Titanic," said Sen. Phil Gramm (R-Tex.), chairman of the Finance Committee's subcommittee on health.

But the more circumspect response of Senate Finance Committee Chairman William V. Roth Jr. (R-Del.) suggested that the political popularity of the plan in an election year may make it difficult for the Republicans to dismiss it out of hand. Roth said only that Clinton had highlighted an important health care issue and that he is eager to see more details.

Administration officials contend the new plan would not add significantly to Medicare's costs because new enrollees would pay premiums that would entirely cover their costs over time.

Under the plan, early retirees would not only pay a monthly premium, but once they reached age 65, they would also be required to pay roughly $10 to $20 a month more for each year of early retirement than those who waited to enroll.

Medicare premiums are currently $43.80 a month. People who retire at age 62 would face premiums of between $73.80 and $103.80 a month when they reach retirement age.

Critics of the administration's plan questioned whether the program would indeed pay for itself and said they feared it could send the wrong message at a time when Congress is attempting to raise the age of retirement. Other critics suggested the program would fail to achieve its stated goals because its steep premiums would put it out of reach of the people most in need.

Gail Wilensky, a specialist in the workings of Medicare, raised several questions: "Who will participate in this program," she asked. "How sick are they? Will they live in Minnesota or Oregon where people spend a lot less on health care, or places where they spent more? How long will they live?"

At a Capitol Hill news conference, Gramm said Clinton's proposal would exacerbate the solvency problems of both Medicare and Social Security by encouraging workers to retire earlier, and undermine already passed legislation to encourage later retirement by gradually raising the eligibility age for Social Security from 65 to 67.

John Rother, chief lobbyist for the American Association of Retired Persons and a strong supporter of the Clinton proposal, dismissed fears about the proposal's costs. "Projections are projections," he said. "Until recently we have had projections of huge budget deficits. They can be off either way."

Staff writer John F. Harris contributed to this report.