By Clay Chandler
Washington Post Staff Writer
Wednesday, July 23, 1997; Page A04

It quacks. It waddles. But do we have to call it a duck?

That, in essence, is the problem vexing President Clinton and congressional Republicans this week as they debate a Senate proposal to raise the Medicare premiums paid by wealthy senior citizens, and find themselves at odds over who would collect such an increase.

Both sides profess support for so-called means testing as an essential step to rein in health care spending before the baby boomers hit retirement. But Republicans, fearful of expanding the mandate of an agency many have vilified on the stump, are balking at the notion of having the IRS collect the premium increase.

Clinton, meanwhile, has proposed a thinly veiled alternative that seems unlikely to fool high-income taxpayers.

Neither side seems eager to state the obvious: It is all but impossible to effectively collect such an income-based increase without involving the IRS.

Under the Senate proposal, the job of collecting the premium increase would fall to officials at the Department of Health and Human Services and the Social Security Administration. Taxpayers would be billed according to the income on their latest available tax return, and HHS would then instruct the Social Security Administration to deduct the amount of the increase from monthly Social Security checks.

Analysts at the Congressional Budget Office said that handling these new duties would cost HHS $30 million to $50 million annually.

Also, because of higher overhead and lower compliance, the premium increase would bring in only $3.9 billion in new revenue over the next five years if administered by HHS, according to CBO. That's $5 billion less than the revenue that would be collected if the increase were administered by the IRS.

Treasury officials fear the Senate proposal would lead to huge billing discrepancies, because HHS officials would be obliged to administer premium increases on the basis of three-year-old tax returns. "Of those receiving bills, roughly one-half will be overbilled," a senior Treasury official concluded in a recent memo.

Under Clinton's alternative, high-income seniors would be sent a "Medicare Premium Adjustment Form" with their annual tax instructions. The form would include instructions for calculating income and their Medicare premiums. Beneficiaries would be required to send the Treasury Department a check made out to the "Medicare Trust Fund" by April 15.

"The president's plan seems more workable, at least on its face," said John Rother, lobbyist for the American Association of Retired Persons. "But we still have questions about it."

President Clinton "is not going to go out any further on this limb for Republicans than he absolutely has to," said former CBO director Robert D. Reischauer.