Tough issues dodged so far Clinton, Dole skip talk on Medicare, Social Security; CAMPAIGN 1996


WASHINGTON -- Bill Clinton and Bob Dole argue about who can best lead the nation into the new millennium, but both are taking a pass on some of the toughest questions the next president will have to grapple with in preparing for that future.

For example: How hard should old people be pushed into joining HMOs to reduce the costs of Medicare? Can the country afford to continue guaranteeing nursing home care through Medicaid for everyone whose money runs out? Is it time to start letting younger workers invest some of their Social Security tax money in private savings plans rather than just raising taxes or cutting benefits?

"Candidates cannot talk about this because something they say will be taken out of context, and their opponent will use it against them and they will be totally destroyed," said Sen. Alan K. Simpson of Wyoming, who watched his fellow Republicans lose public support for their "revolution" last year when they tried to slow the growth of Medicare costs. "They will be pilloried, eaten alive, put on the spit," he said.

If the automatic benefit programs of Medicare, Medicaid and Social Security are left unchecked, they will consume every dollar of federal tax money -- except for those paying interest on the national debt -- within 20 years. The health and financial security of millions of Americans, particularly younger generations, are at stake.

Yet, when asked what they would do about it, the two major presidential candidates seem to have taken a vow of silence. If pressed, they both express fervent support for the benefit programs, and suggest kicking reform proposals to some bi-partisan commission to resolve.

At worst, the Clinton and Dole campaigns bicker about whether the Republicans were seeking Medicare savings merely to pay for a tax cut.

"Dealing with these programs requires somebody to give something up; when you're trying to get elected, you don't talk to people about giving things up," said Sen. Bob Kerrey.

The Nebraska Democrat joined with former Missouri Republican Sen. John C. Danforth to chair a bipartisan commission created by Clinton in 1993 to recommend a plan for reforming the benefit programs, known as "entitlements." The group warned of the urgency of the problem but could not agree on a solution.

It is not unusual for such commissions to deadlock, said Martin Corry, chief lobbyist for the American Association of Retired Persons. He recalled that even the Greenspan Commission, widely credited for producing a new financing scheme for Social Security in 1983, was stymied until Dole and Sen. Daniel Patrick Moynihan, a New York Democrat, struck a deal on their own with the Reagan White House. Similar back-channel bargaining may be necessary in this case.

"These are tough decisions that can't be taken out of politics," Corry said.

Impending catastrophe is what forces action on these issues, and that may not be far off, said Gary Burtless, an economist with the Brookings Institution.

"Anyone who has examined the finances of Social Security and Medicare for longer than an hour recognizes an inescapable fact: that either the benefits are going to have to be cut or the revenues -- taxes -- are going to have to go up," said Burtless.

In addition to the three monster entitlements -- Social Security, Medicare and Medicaid -- there are several smaller, but still costly automatic benefit programs, including veterans benefits, federal retirement programs, student loans and farm subsidies. While trims have been made in some areas -- particularly farm aid -- most analysts believe more must be done.

"This is not rocket science; it's simple accounting," Burtless said. "I'm one of those who thinks it would be much, much better for the country, if we did something sooner rather than later."

The portion of Medicare that pays hospital costs for elderly Americans is financed by a tax on the wages of American workers and demands almost immediate action, according to the Clinton administration trustees who oversee the program.

The hospital part of Medicare is already losing money each year and will be broke by 2001. Congress will have to act shortly either to raise the payroll tax that pays for the program or cut its costs.

Clinton and Dole each backed proposals in the last Congress that stave off bankruptcy for 10 years by cutting payments to Medicare providers, primarily hospitals. Those proposals were part of balanced budget negotiations that ultimately collapsed. A more troublesome issue is posed by the portion of Medicare that covers doctors and lab fees for beneficiaries who sign up for that coverage. They pay a premium equal to 25 percent of the average cost per person. That cost is rising at the rate of 10.5 percent a year and the remaining expense is borne by federal taxpayers.

The leading proposal for reducing Medicare costs is to replace the practice of simply paying whatever medical bills beneficiaries incur with a system of managed care such as that used by health maintenance organizations. In such programs, a primary-care physician serves as a "gatekeeper" to encourage preventive care and veto specialized treatment that is deemed unnecessary.

Clinton and Dole have each favored allowing Medicare beneficiaries more opportunity to join HMOs but have differed on many elements of how the new program might be structured, including whether Medicare patients should have to pay more for retaining the more costly fee-for-service coverage.

Dealing with Medicaid, the health care program for the poor, may be even more difficult as it is also used as the primary long-term-care insurance for the middle class. To finance their nursing home care at an increasingly costly rate, elderly Americans rely on the taxpayers after they run out of their own money or have transferred it to their children.

States, which bear half the cost of Medicaid, have already begun dealing with the problem on their own, moving more and more beneficiaries into HMOs. But the nursing-home issue "ultimately requires a debate about rationing of care" for individuals getting very expensive and probably futile treatment at the end of their lives, said Richard C. Leone, president of the Twentieth Century Fund, a public policy research foundation.

That could mean withholding treatment, such as organ transfers, heart bypasses or life support, from some patients.

"It will not be an easy discussion," Leone said.

Social Security poses a threat that is harder to see because dire consequences are said to be decades away -- a lifetime in politics. In fact, Dole likes to brag that he played a key role in saving Social Security from bankruptcy in 1983, when the program was last restructured.

Acting primarily on recommendations from the Greenspan commission, Congress voted then to raise the retirement age from 65 to 67 by 2027, to delay the retirees' scheduled cost-of-living increase by six months and to increase payroll taxes for employers and employees.

That step was acknowledged to be only temporary, however. The current problem is a matter of demographics that calls for a more comprehensive solution.

Today's Social Security benefits are financed with payroll taxes from today's workers on a pay-as-you-go basis. But the number of beneficiaries is growing at a faster rate than the number of workers, and retirees in the '90s are living longer than their predecessors. The squeeze will only get worse when the baby boomers retire.

Proposed solutions often include a combination of actions to reduce benefits, raise the payroll tax and redesign the Social Security program for future generations so that it more closely resembles individual investment plans, such as IRAs.

Pub Date: 10/14/96

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