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Plan would pass more Medicare cost to elderly; Senator heading study seeks cap on federal share


WASHINGTON -- The chairman of the government's Medicare reform commission called yesterday for a radical overhaul of the nation's health insurance system for the elderly, including a cap on the government's contribution to the cost of the program.

Medicare "needs fundamental reform," declared Sen. John B. Breaux, a Louisiana Democrat who is chairman of the Bipartisan Commission on the Future of Medicare.

His approach would give incentives to the elderly to buy private insurance with government financial assistance.

By potentially making the elderly shoulder more of the burden of expensive health care coverage, his plan would seek to encourage enrollment in health maintenance organizations and other forms of managed care. It would also gradually raise the eligibility age from 65 to 67.

The commission, which meets Tuesday to consider Breaux's plan, is taking the lead in formulating Congress' response to one of the thorniest issues that will be before it in the next two years.

Many Democrats believe that under the framework outlined by Breaux, the elderly would end up paying more for fewer benefits.

"It throws the Medicare recipients on the tender mercies of HMOs, and I'm not satisfied that I want to be placed in that position or that beneficiaries want to be placed in that position," said Rep. John D. Dingell, a Michigan Democrat and influential member of the commission.

Some 85 percent of Medicare's 38 million elderly and disabled beneficiaries are in traditional fee-for-service Medicare, allowed to select any doctor or hospital participating in the program.

Under Breaux's approach, the elderly would have a choice between the traditional fee-for-service Medicare program and a selection of HMOs and other managed care plans. Policy analysts believe that the managed care plans would be significantly cheaper than traditional Medicare, saving money for the government, but perhaps offering lesser benefits.

For each Medicare recipient, the government would offer to pay a percentage of the cost of an average health plan. In the Federal Employees health plan, which is a model admired by Breaux, the government pays 72 to 75 percent of the cost of an average plan.

Because the elderly would have to pay the rest themselves, they would have a strong incentive to choose a relatively cheap health care plan.

At its current rate of spending growth, the Medicare program, which is financed by 2.9 percentage points of the payroll tax, is projected to go bankrupt in 2008.

Pub Date: 1/23/99

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