By Eric Pianin
Washington Post Staff Writer
Friday, July 11, 1997; Page A04

Congressional negotiators yesterday ruled out a Senate plan to raise the eligibility age for Medicare recipients from 65 to 67 as they met to meld House and Senate bills into a final balanced budget and tax package.

Critics, including the White House and seniors' groups, have charged that the proposal – even though gradually phased in over coming decades – eventually would leave many retired elderly people without any health care coverage for up to two years.

The proposal's fate was sealed early yesterday when House members went on record, 414 to 14, to express their opposition to any effort to raise the eligibility age. House Budget Committee Chairman John R. Kasich (R-Ohio), an advocate of the change, acknowledged, "I don't think the system can accommodate that yet."

However, two other Senate-passed proposals – to "means-test" Medicare premiums by charging wealthier seniors more for outpatient services and to impose a $5 per month co-payment for some health care services – were "in play," according to House and Senate negotiators.

The critical budget and tax cut negotiations, involving more than 80 House and Senate members from both parties as well as White House officials, began yesterday at the Capitol with cautiously optimistic speeches.

"This is a very exciting day for me," said Senate Budget Committee Chairman Pete V. Domenici (R-N.M.), who presided over the conference. "In about eight or nine days – 10 – we are hopeful we will complete our work. With the cooperation of the president we'll get there."

Meanwhile, the Clinton administration scrambled to prevent reports that the deficit is falling faster than anticipated from triggering a retreat on other budget issues. Earlier, Clinton had opted to delay release of the administration's mid-year budget forecast that would have revealed how far the figure has declined. Some GOP and Democratic leaders were concerned that release of the good news might undermine their drive to enact a balanced budget plan this summer.

White House sources said yesterday the president now wants to celebrate the plunging deficit and may announce in his Saturday radio address that the administration's deficit estimate is even lower than the $45 billion reported Wednesday in The Washington Post.

Yesterday's opening negotiating session suggested there would be swift movement on a number of fronts, including Medicare. The Senate, in a display of bipartisanship two weeks ago, approved three changes in Medicare: raising the eligibility age, imposing means-testing and adding the co-payment. But the House-passed version of the budget contains none of those provisions.

House GOP leaders and the White House until now have argued that the Senate provisions should be considered in coming years as part of a more fundamental restructuring of Medicare and other entitlement programs. But Clinton gave a boost to the means-testing proposal Wednesday, telling reporters he would consider joining Republicans in raising premiums on the most affluent Medicare recipients.

With the president and a cross-section of House and Senate Democrats behind the proposal and the American Association of Retired Persons not challenging it, there is a strong possibility the means-testing plan will survive.

"Clearly, the Senate can't leave this conference with nothing from those three provisions," Domenici said.

There also were signs yesterday that, under pressure from church, business and immigrant advocacy groups, the House was backing away from its tough stand on welfare benefits for immigrants. Congress has agreed to restore some benefits for legal immigrants eliminated under 1996 welfare reform legislation.

The House provision would assure welfare coverage for senior and disabled immigrants legally in the country by last Aug. 22 but would deny coverage to those who subsequently become disabled. The Senate approach would assure coverage to seniors and to those who are currently disabled or become disabled.

Several GOP House negotiators conceded yesterday that their position has become politically untenable and one marveled at the bad publicity Republicans have invited. "Clearly, we like to play with butane," a senior House Ways and Means Committee Republican said.

At the White House, Democrats promoted their proposals for tax cuts as "fairer" to middle- and lower-income people, including a $500-per-child tax credit extended to lower-income working families.

Democrats have criticized the House GOP plan that would deny the tax credit to working poor families who pay little or no income tax because of the benefits of the earned income tax credit. Republicans have countered that the tax cut should benefit only those who pay income taxes and that Democrats, in effect, are proposing a return to welfare.

Vice President Gore shared a stage with his presumptive rival for the presidential nomination in 2000, House Minority Leader Richard A. Gephardt (D-Mo.), to demonstrate that the party's often-fractured coalition between its executive and congressional wings is unbroken on that issue. "Democrats are united in the Senate and in the House in our determination to make this tax bill fairer," said Senate Minority Leader Thomas A. Daschle (D-S.D.).

Democrats also are demanding that former welfare recipients who take government-subsidized jobs receive the minimum wage and the same protection under fair labor and workplace safety laws as other workers.

Rep. John Linder (R-Ga.) complained in a floor speech there was "an Alice in Wonderland quality" to the Democrats' call, and that welfare recipients who could not find work do not deserve the same treatment as others. "It is dishonest, it seems to me, at least misleading, to try and convince Americans that these are hard-working people just trying to raise a family when, in fact, they are welfare recipients," he said.

Staff writers Peter Baker, Clay Chandler and John E. Yang contributed to this report.