Medicare, Medicaid in budget-cut sights


WASHINGTON -- In a move fraught with political risk, key congressional Republicans said yesterday that they would move to cut spending on the health care that the elderly and the poor receive from the government over the next seven years.

Seeking to balance the federal budget and avert a predicted bankruptcy of the Medicare trust fund in 2001, the leaders of the House and Senate budget committees said they would produce plans that curtail the growth in Medicare and Medicaid.

"We have a great health care system," said Sen. Pete V. Domenici of New Mexico, chairman of the Senate Budget Committee. "It just costs too much."

Rep. John R. Kasich, an Ohio Republican who heads the House budget panel, added: "We have ignored this problem for too long. Our senior citizens do not realize that this program is going broke."

The congressmen's remarks are sure to anger the elderly, a powerful interest group that Republicans and Democrats sought to assuage during the 1993 election by vowing not to touch Social Security as part of budget balancing. To 36 million Americans who rely on it, Medicare is as sacred as Social Security.

At yesterday's hearing, the American Association of Retired Persons signaled its position, saying that "singling out Medicare for deficit reduction would have serious implications for older Americans because it would probably mean significantly higher out-of-pocket expenses."

This was not the first time Republicans have warned of cuts in Medicare and Medicaid. Two weeks ago, a Senate Republican group headed by Sen. Judd Gregg of New Hampshire proposed to reduce the growth in spending on entitlements by $475 billion over the next five years, including cuts of $235 billion to $255 billion.

Appearing before the House Commerce Committee's health subcommittee, Mr. Domenici and Mr. Kasich added momentum toward the cuts, though Senator Domenici used figures that suggested they would be much less than Senator Gregg's group had offered.

He said his committee would propose reducing the growth in all federal spending from 5 percent to 3 percent annually in order to balance the budget. Medicare growth would be cut from 10 percent annually to between 6 percent and 7 percent, while Medicaid growth would be halved, from 10 percent a year to 5 percent.

Worked out over seven years, the figures indicated that spending of more than $2.4 trillion would be trimmed by nearly $100 billion, a cut of about 4 percent.

He said those were realistic and achievable goals, "and we will attempt to meet them."

Estimates of future costs of Medicare and Medicaid vary substantially. The Congressional Budget Office says the cost of the two programs will be $407.7 billion in 2000; the Office of Management and Budget says it will be $22 billion lower.

Mr. Kasich also repeated the House Republican promise to turn Medicaid into a block grant -- a lump sum of money -- that would be given to the states to spend on the poor with few restrictions, a prospect at which many Democrats shudder.

"The Republican majority is contemplating very deep cuts in the Medicare and Medicaid programs," said Rep. Henry A. Waxman, a California Democrat who once headed the health subcommittee. Playing down the threat to the budget, he said growth in Medicare and Medicaid "may threaten the economic security of tomorrow only if we do not handle the budget in a rational way."

Medicaid, administered by the states, which also finance some of its costs, serves 33 million poor people. Medicare, entirely a federal program, pays bills for 36 million Americans over age 65, ranging from the poor to the wealthy. Medicare recipients pay some of their costs.

Both programs are entitlements, allowing each person who qualifies to collect benefits, no matter what it costs the federal government. The hospital portion of Medicare is financed by a 2.9 percent payroll tax, split evenly by employers and their workers. The physician portion is financed by the general budget and the elderly.

Medicaid is financed from the general budget. Both programs are growing at about 10 percent a year.

The proposals to reduce spending drew support from two Democrats -- Sen. Bob Kerrey of Nebraska, who said that entitlement spending and interest on the national debt would consume all federal revenue by 2012, and former Sen. Paul E. Tsongas of Massachusetts.

Mr. Tsongas warned that "the country is on the verge of generational warfare" between the elderly, who collect Medicare and Social Security benefits, and young workers who, without changes, will see their taxes increase to support the programs.

The problem, Mr. Kerrey said, is that 45 million people born in the post-World War II baby boom will retire beginning in 2008 and that over 15 years the number of workers supporting each retiree will drop from five to three.

"It's not debatable," he said. "It's going to happen."

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