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Medicare drug bill could face trouble

One of President Bush’s most cherished political goals — signing a bill to add a prescription drug benefit to the Medicare program for older Americans — could be jeopardized by a fight over “affluence testing,” requiring upper-income retirees to pay more for their benefits.
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One of President Bush’s most cherished political goals — signing a bill to add a prescription drug benefit to the Medicare program for older Americans — could be jeopardized by a fight over “affluence testing,” requiring upper-income retirees to pay more for their benefits. When House and Senate conferees meet later this month to hammer out differences between the House and Senate prescription drug bills, affluence testing will be a flashpoint.

Senate Majority leader Bill Frist, R-Tenn., said this week, “We will see some affluence testing introduced into the (final) bill. That’s in the House bill, it’s not in the Senate bill. We’ve demonstrated strong Senate support for that.”

The support Frist was referring to was a 59-to-38 vote in the Senate last week to keep alive an amendment sponsored by Sens. Dianne Feinstein, D-Calif., Don Nickles, R-Okla., and others that would have imposed affluence testing on Medicare recipients.

Feinstein said Congress must “ask those who can afford it to pay more for their Medicare premiums.”

KENNEDY OPPOSED But Sen. Edward Kennedy, D-Mass., who had been the key Democratic supporter of the prescription drug legislation, threatened to filibuster Frist’s bill if the Feinstein-Nickles provision were added to it.

“You can have this amendment or you can have this bill — but you can’t have both,” Kennedy told Frist.

The amendment was dropped on a voice vote and the bill was then passed, with Kennedy and 34 other Democrats joining with 41 Republicans in voting for it.

Frist’s top aide on budget issues, Bill Hoagland, told that the issue of affluence testing — also known as means testing — is “very dicey” and could pose dire problems for the bill in the House-Senate conference.

If affluence testing ends up in the final bill, Kennedy and other liberal Democrats would pull their support from it and likely kill it.

One reason Kennedy now seems to have the upper hand on affluence testing is that — in terms of electoral strategy — Bush needs the prescription drug legislation much more than Kennedy does.

GOP strategists want the prescription drug issue removed from the Democrats’ 2004 campaign rhetoric and by signing a bill Bush would go a long way toward doing that, even if the program were not perfect for all seniors.

Bush and his advisers well know that the peak age group for voting participation is 65 to 74 years old — 72 percent of that group cast ballots in the 2000 election, compared to only 36 percent of people aged 18 to 24.

In the long run, Hoagland said, affluence testing is one of the only ways to control the cost of Medicare.

With outlays of about $277 billion this year, Medicare is the second largest federal program overall after Social Security.

Even without a drug benefit added, the program’s costs will rise from 2.5 percent of Gross Domestic Product today to 9.2 percent in 2075.

Feinstein stressed that her provision would only have affected three percent of all Medicare beneficiaries, those with annual incomes above $75,000, or above $150,000 for couples.

The Feinstein-Nickles provision was not directly related to the prescription drug issue. It would have applied to Medicare Part B, the part of the program that helps pay for doctors’ services, outpatient services, diagnostic tests, and medical equipment.

Under the Feinstein-Nickles plan, those with incomes above $75,000 would pay 25 percent of the cost of the Part B the premium, about $700 a year, just as they do under current law.

But Feinstein-Nickles would require individuals with incomes between $75,000 and $100,000 to pay 50 percent of the cost of the premium, which would have worked out to about $1,400 annually in 2003.

And those retirees with incomes above $100,000 would pay the full cost of the premium, about $2,800 a year.

The House bill, passed by the margin of a single vote last week, takes a different approach to affluence testing but the principle is the same: Retirees with higher incomes should pay more for Medicare benefits.

The House measure would require beneficiaries with annual incomes over $60,000 to pay more of out of their own pocket for prescriptions before being eligible for “catastrophic coverage” under which the government would pay for all their prescription drugs.

House aides said the provision would apply to only four percent of those now getting Medicare benefits.

A WELFARE PROGRAM? Kennedy and other liberal Democrats fear that once wealthier people are required to pay more for Medicare, their support for it will dwindle and they’ll seek to opt out of the program, leading someday to it becoming a “welfare program” for the poor.

Means testing, Kennedy recently said, would “depart from Medicare’s commitment over four decades to help all seniors, regardless of income. All workers pay into the Medicare trust fund, and all retirees should benefit from it.”

There’s another contentious issue Congress will need to grapple with if it intends to impose affluence testing: how to verify the income of beneficiaries and how to collect the premium payments?

Robert Greenstein, the executive director of the Center for Budget and Policy Priorities, a liberal think tank, told that the logical agency to handle these problems is the Internal Revenue Service.

“People’s first reaction might be negative when they hear the IRS, but in fact it is much less intrusive than if you had to do this through the Medicare office,” he said. “Everybody files a tax return and it would simple for people at higher incomes to pay a somewhat higher premium for Medicare. It would be reflected in their tax payments when they file their return. You wouldn’t need to hire an army of additional bureaucrats. It’s definitely workable.”

But Greenstein acknowledged, “Politically it is very difficult to achieve. The reason is, in part, a number of the conservative Republicans who favor higher premiums for high-income Medicare beneficiaries are allergic to having it done through the tax system.”

Greenstein said premiums for affluent retirees could be increased, but set at a level that “there is still some real gain from being in Medicare for those people.”

“This is an issue a lot of liberal, moderate, and conservative policy analysts have known for 15 years how to solve. Politically, because of various forms of often ideological opposition, it never gets done,” Greenstein said.

As for the prescription drug legislation that Bush so dearly wants to sign, Greenstein said, “I’m not very optimistic that this bill is the one where we will have a breakthrough” on affluence testing.

Yet Feinstein among others remains convinced that affluence testing must come sooner or later. Feinstein spokesman Scott Gerber said, “She doesn’t think low-income people should subsidize Medicare for the wealthiest Americans.”