By Eric Pianin and Peter Baker
Washington Post Staff Writers
Tuesday, July 22, 1997; Page A01

Republican budget negotiators yesterday all but abandoned a Senate plan to impose higher Medicare premiums on affluent senior citizens in the face of strong resistance in the House provoked by concern that Democrats would make an issue of it in next year's campaign.

The decision to table means testing – along with two other Senate-passed proposals to raise the Medicare eligibility age from 65 to 67 and charge a $5 co-payment for certain home health care services – ended the Senate's hope to use the balanced budget deal as a vehicle for enacting long-term changes to control Medicare costs.

Frustrated Senate Republicans blamed President Clinton for refusing to show leadership and for insisting on inclusion of what they deemed a "poison pill."

While Clinton endorsed the means-testing concept, he insisted that the Internal Revenue Service compute and collect the increased premiums – rather than leaving it to the Department of Health and Human Services, as called for in the Senate plan. With the IRS in charge, Republicans said, the premium increase would be mistaken for a "tax increase" and they refused to go along.

"I think the president killed means testing when he didn't strongly come out in support of it at first and then added the poison pill of IRS collection," complained Sen. Phil Gramm (R-Tex.), a co-author of the bipartisan means-testing proposal.

"The Senate gave the president the opportunity to have long-term reform that originated elsewhere than the White House but he didn't take it," Gramm added after a meeting in the office of House Speaker Newt Gingrich (R-Ga.).

The House, Senate and White House had all agreed in advance to $115 billion of Medicare savings in the coming five years – mostly through reductions in reimbursements to doctors, hospitals and health maintenance organizations. But Gramm, Sen. Bob Kerrey (D-Neb.) and other moderates and conservatives advocated pushing further by raising premiums for seniors with incomes of above $50,000 a year and reducing benefits for beneficiaries as well. The Senate eagerly went along with their proposal last month in approving its version of the balanced budget plan, 73 to 27.

Although the American Association of Retired Persons and other seniors and labor groups opposed means testing, House Republicans needed little coaxing to block the plan. Gingrich, Ways and Means Committee Chairman Bill Archer (R-Tex.) and many others feared that by tampering with Medicare premiums, they would rekindle Democratic charges that they were "cutting Medicare" to pay for tax cuts.

Also, many recalled that then-Ways and Means Committee Chairman Dan Rostenkowski (D-Ill.) was literally chased down the street in his North Chicago district by angry seniors in 1989 after Congress approved a Medicare premium increase to finance new catastrophic health care benefits.

"We jumped before they told us to jump," an aide to House Majority Whip Tom DeLay (R-Tex.) said yesterday.

As a face-saving gesture to the Senate, Gingrich told reporters that senators would be given one more opportunity to try to persuade the president to go along with their plan. An aide to Senate Budget Committee Chairman Pete V. Domenici (R-N.M.) said that House and Senate negotiators "have agreed to disagree" and that Domenici felt obliged to argue his case with the White House because of the large number of Republicans and Democrats who voted for the plan in the Senate.

But even before negotiators could act, officials at the White House retreated to their original position that it makes more sense to consider that approach as part of a separate long-term effort to restructure entitlements after the budget agreement is complete.

"The White House was quite clear from the beginning, saying the issue of means testing was more appropriate to a long-term study of entitlements and Medicare in particular," said White House press secretary Michael McCurry.

The president had pointed out, he added, that the Medicare savings needed to balance the budget by 2002 could be achieved without means testing.

Clinton aides said they were not surprised that means testing failed, especially after they heard the vehemence of bipartisan opposition as expressed by House Minority Leader Richard A. Gephardt (D-Mo.) and Archer during a meeting with the president last week.

But the aides disputed charges that Clinton did not fight hard enough for the plan, noting that in that same meeting the president unequivocally told congressional leaders that he favored means testing as long as the IRS collected the extra premiums.

Moreover, administration officials spent much of the past weekend trying to develop a compromise to address concerns about the use of the IRS. According to one official, the alternative would still have used the IRS as the collection agency but those paying the extra premiums would not have done so using their regular tax form.

Even without the means-testing measure, the House- and Senate-passed budget plans call for $50 billion in "revenue raisers," or taxes, over five years.

House and Senate GOP leaders and conferees worked throughout the day yesterday in search of consensus among themselves on a broad range of Medicare, Medicaid, child health care and tax issues as they prepare for a showdown with the White House over a balanced budget and tax cut package.

Democratic and GOP officials differed over whether they had made any real progress. Senate Minority Leader Thomas A. Daschle (D-S.D.) declared that "we got nowhere" over the weekend during negotiations over a tax package, while Senate Majority Leader Trent Lott (R-Miss.) and some House GOP officials say they believe that they have reached an important "turning point" and that an agreement could be reached by late this week.

However, Clinton aides were less sanguine.

"It's still not clear to us that they're ready to put anything on the table," an administration official said.

Clinton plans to turn up the heat on Republicans today with a public statement reminding congressional leaders how close they are to reaching a historic agreement and urging them not to pass a plan that is unacceptable to him. During a photo opportunity with his budget team, aides said, Clinton will outline the basic principles he will require in any package sent to the White House.

Staff writer Clay Chandler contributed to this report.