MEDICARE HAS been a favorite hunting ground for budget cuts in recent years, but only cuts that would draw a minimum amount of blood. Congress has carefully aimed its actions mainly at the providers of services -- doctors and hospitals -- rather than the 33 million Medicare recipients.
Now, however, a shift has been discussed in which the squeeze would be put not just on providers but on patients as well, by raising premiums, deductibles and perhaps certain co-insurance rates to make them bear a larger percentage of the cost. Advocacy groups, or some of them, are resisting. The issue is much the same as that which arose in the case of the short-lived catastrophic health insurance program, which Congress proudly passed with President Reagan's support in 1988, then scrambled to rescind last year when the better-off elderly complained that they were being asked to finance more than their fair share. The question is how to extract money from Medicare (or Social Security) recipients and keep the result from being regressive.
There is no way for the budget negotiators to reach their provisional target of $50 billion in deficit reduction next year without putting the arm on entitlements. For political reasons if no other, the full amount can't come from taxes, nor for substantive reasons can it all come from defense and the other so-called discretionary spending subject to the appropriations process. But while entitlements -- the automatic spending programs that the appropriators don't control -- have to play a part, there is great political reluctance to touch the largest of them, Social Security. Proposals have been made to skip a cost-of-living increase in Social Security benefits as part of a broader suspension of indexation or to subject a larger share of the benefits to the income tax. The latter would be more progressive, but neither is palatable in an election year.
Some negotiators have thus begun eyeing Medicare, second in size among domestic programs only to Social Security and received by the same population, as an alternative. An increase in patient payments under Medicare is not thought to resonate the way a comparable dunning under Social Security would. You get the same money, or nearly so, from about the same people, but without the same static: that is the theory. Among ideas are to raise the premiums for part B of Medicare, which pays doctor bills, so that they would cover 30 instead of the present 25 percent of program costs and to double and then index the present part B deductible of $75 a year.
But a preemptive strike by Families USA, an advocacy group, warns that these steps together would eventually cost beneficiaries roughly the same as the feared alternative of a one-year freeze on Social Security benefits and would be equally regressive. The study rightly reminds that the income tax offers the fairest way of making the mostly elderly beneficiary population contribute to deficit reduction. Only 50 percent of Social Security benefits above certain income thresholds is subject to the income tax now. A higher percentage and lower threshold would raise the needed money progressively. If Congress tries to extract the money through Medicare instead, it must do so in a way that gives equal regard to ability to pay.