WASHINGTON -- Clearing probably its highest hurdle in an ambitious year, the Republican-led House voted yesterday to drastically reduce the cost of Medicare, mostly by raising premiums and slashing payments to doctors and hospitals.
By a margin of 231 to 201 that closely followed party lines, the House agreed to overhaul for the first time in three decades the Medicare health care program, which serves 37 million elderly and disabled Americans. Medicare costs would shrink by $270 billion over seven years.
Even before the vote, President Clinton threatened to veto the measure.
"I will not let you destroy Medicare, and I will veto this bill," Mr. Clinton said yesterday. "I have to do that to protect the people of the United States and to protect the integrity of this program."
Under the GOP plan, Medicare beneficiaries would have to choose between remaining in a traditional "fee-for-service" program with higher premiums or joining a "managed care" program that might be cheaper but would restrict their choice of doctors and treatments.
Republicans say that bold measures are needed to save Medicare from bankruptcy and to keep it from gobbling up the lion's share of the federal budget. Medicare savings are the largest element in the Republican plan to balance the budget by 2002.
"We wanted a solution that preserves and protects Medicare for current beneficiaries, helps baby boomers retire with safety and security and saves young Americans from higher taxes, higher interest rates, crushing debt and a bankrupt government," House Speaker Newt Gingrich said in a speech that brought his Republican colleagues to their feet with cheers.
Democrats asserted that the Republicans were squeezing Medicare far more than necessary because they need money to finance a proposed $245 billion tax cut.
Seeds of compromise
Yet the outlines of an eventual compromise are already visible. Mr. Clinton has offered his own plan for a Medicare overhaul that would trim $124 billion. Lawmakers of both political parties are talking about a middle ground somewhere between $170 billion and $240 billion.
"The $270 billion figure was a leap of faith -- a lot of us would be happier with $240 billion," said Rep. Wayne T. Gilchrest of the Eastern Shore, one of four Maryland Republicans, all of whom voted for the plan. "This is a good bill, but I think everyone is concerned about the perception that we're doing this for the tax cuts."
The tax-cut issue divides many House Democrats from Mr. Clinton, who has offered his own proposal to cut taxes by $110 billion. "There's nothing courageous about cutting Medicare to pay for tax breaks for the wealthy," argued Rep. David E. Bonior of Michigan, the House Democratic whip.
All four Maryland Democrats voted against the bill.
Even so, yesterday's vote was a sign that Republicans have been largely able to overcome months of Democratic efforts to arouse public opposition to the measure.
"People call thinking we're doing away with Medicare entirely," said Rep. Constance A. Morella, a Montgomery County Republican. "But once I explain it to them, they understand that we have to do something. I just think it's the right thing to do."
Mrs. Morella and other Republicans say they have explained to constituents that they need not leave the current Medicare program if they don't want to but that some cost controls were needed to help balance the federal budget.
Before it can become law, the Medicare bill will be inserted into a much broader measure -- a "reconciliation bill" -- that lays out the Republican plan for balancing the budget over seven years.
The reconciliation bill is scheduled for a House vote next week. It will then be combined with a similar Senate bill before being sent to President Clinton.
Serious negotiations with the White House probably won't begin until Mr. Clinton acts on the reconciliation bill next month.
Republicans take a risk
In moving to sharply restrain a highly popular benefit program -- even one that by nearly all accounts has grown too expensive to continue as it is -- the Republicans are taking a risk that would have been unthinkable a year ago, when the Democrats controlled Capitol Hill. Elderly Americans are among the most potent voter blocs, and their benefit programs have long been sacred cows.
Among the Republicans' bolder moves is ending Medicare subsidies for upper-income beneficiaries -- a "means-testing" idea not usually associated with their party.
"Only in times of political transition are lawmakers willing to face problems that the American people want them to face," said Joseph Cooper, a congressional scholar at the Johns Hopkins University. "It's like when the Democrats faced the Depression in 1932, and the Republicans faced slavery during the 1860s."
To help balance the budget, the Republicans are also sharply slowing the growth of Medicaid, the health care program for the poor, much of which pays nursing home bills for middle-class Americans who have run out of their own money.
"Shame on you for balancing the budget on the most vulnerable people in our society," said Rep. Eva Clayton, a North Carolina Democrat.
Because the two health care plans are the largest and fastest-growing items in the federal budget, Republicans recognized that they would have no choice but to restrain both of them if they were going to meet their target of balancing the budget by 2002.
'Heart' of balanced budget
Mr. Gingrich has called a reform of Medicare "the heart" of the balanced budget effort, and he personally directed both the design of the overhaul and the political message that accompanied it.
Seizing on a Clinton administration report last spring that the Part A (hospital) portion of the Medicare program would go broke by 2002, Republican leaders argued that their goal was to "preserve, protect and improve" the program.
But in addition to the $90 billion needed for the Part A program, the Republicans redesigned the Part B program, which pays doctor and outpatient fees. They set fixed limits on expenses per beneficiary rather than paying bills as they rise with inflation.
Those limits mean that Medicare would spend about $1,000 less per beneficiary by 2002 than it would if the current system were not changed. Nevertheless, under the GOP plan, spending is expected to rise from an average of $4,800 per person this year to $6,700 by 2002.
Traditional fee for service -- Patients visit whichever doctors they choose. Medicare pays for most services.
HMOs -- Medical services provided by a network of doctors organized by private insurance companies. Care coordinated by primary care physician.
PPNs -- A "managed-care" network similar to HMOs but run by doctors and hospitals without an insurance company.
Medisave -- Tax-free savings account used to pay for routine medical care. Costs associated with catastrophic illnesses covered by insurance.
INCREASED COSTS FOR FEE-FOR-SERVICE OPTION
Monthly premiums -- For the Medicare Part B, which covers doctor bills and outpatient expenses, premiums rise about $27 a month more than if there were no change. Now set at $46.10, they would reach $87.60 a month by 2002.
Premium subsidies -- The GOP plan phases out premium subsidies for upper-income Americans, including single beneficiaries who earn at least $75,000 and couples who earn more than $125,000.