The House last week approved tax-cut legislation that would give a break to seniors who bought insurance to cover their prescription drug costs. The bill met immediate resistance from President Clinton, who said the total tax cut threatens Medicare solvency.
The legislation, which passed the House by a 223-208 vote, aims to put Clinton on the spot by forcing him to come forward with a comprehensive Medicare reform plan. Only if he does will Congress agree to extend Medicare coverage to prescription drugs.
In threatening a veto of the legislation, however, Clinton played his own Medicare card. He said at a July 21 news conference in Washington that the bill's $792 billion cost over 10 years would handcuff the federal government as it tried to ensure the solvency of Medicare and cover prescription drugs.
"They say our drug program will cost more," Clinton said. "They don't put a red cent into it (prescription drugs). .. . Even if (the Republicans) don't have a drug program, if you adopt their tax-cut program, they won't be able to extend the solvency of Medicare, and they will have to have huge (Medicare) cuts."
Republicans, however, said they have protected Medicare revenue by passing legislation that creates a "lockbox." That legislation reserves for Medicare and Social Security the share of the budget surplus that results from Social Security and Medicare tax collections. It passed the House in May but has stalled in the Senate.
"We can preserve and improve Medicare, and we can give some of Americans' hard-earned money back," said Rep. William Thomas (R-Calif.), chairman of the House Ways and Means Committee's health subcommittee.
Among other healthcare-related tax cuts, the House GOP plan would allow Medicare beneficiaries to deduct from their taxable incomes the costs of insurance policies that covered prescription drugs.
It would take effect only with passage of a comprehensive Medicare reform bill that included a subsidy for Medicare beneficiaries with incomes of less than 135% of the federal poverty level. Such a bill also must require Medicare supplemental plans to cover prescription drug costs.
The House legislation would allow employees to deduct from their taxable incomes the cost of buying health insurance coverage when their employer paid less than half of the premium. It would give tax breaks to people who purchased long-term-care insurance and to people who cared for a disabled senior in the home.
The Senate Finance Committee last week approved a tax-cut bill that includes most of the House measures. It does not include Medicare prescription drug coverage.
Meanwhile, the Congressional Budget Office criticized Clinton's prescription drug proposal, saying it would cost $168.2 billion over 10 years, $49.4 billion more than the White House had projected.
Clinton's plan would cover half of seniors' prescription drug costs, with an initial cap of $1,000 in per-beneficiary government expenditures.
The CBO also said the White House overestimated the savings from Clinton's plan to modernize fee-for-service Medicare expenditures. The plan includes a proposal to establish Medicare preferred-provider networks and extends payment savings enacted under the Balanced Budget Act of 1997.
The White House said those proposals would save $64.2 billion, but the CBO said they would save $48.2 billion.
Clinton downplayed the CBO projections. He pointed to the CBO's estimates of savings from Balanced Budget Act payment policies, which have been low. "Whenever there's been a difference between us and the CBO, we've been right, and they've been wrong," Clinton said.