Health secretary's plan to pay for long-term illness faces revision

Otis Bowen may think he has a better idea, but a lot of people want to change it. Dr. Bowen is the secretary of Health and Human Services. He proposes to provide Americans with health insurance coverage against the costs of long-term illness, using a variety of public and private insurance.

For Bowen's idea to win administration approval, it must first be approved by the White House's Domestic Policy Council and then by President Reagan. Both liberals and conservatives say it is likely to be changed considerably before it becomes policy. Most in jeopardy is the Bowen proposal to expand medicare to pay for the long-term costs of acute care of Americans who receive medicare. Bowen would have medicare enrollees pay the additional annual costs, which he says would be slightly less than $60 a year.

Conservatives, in particular, object to this proposal as the opening of a Pandora's box. ``The real defect'' of the proposal, says Stuart Butler, is that ``it will set in motion dynamics that will make it impossible to hold'' medicare costs under control.

Mr. Butler, director of the Heritage Foundation's Roe Institute for Economic Policy Studies, foresees pressures on Congress by liberals and representatives of older Americans to change the medicare program to cover many kinds of illnesses. At the same time, he says, fewer incentives will exist for the medical community to boost the costs of treatment. Finally, ``Congress has every incentive to hold the [medicare] premium down, for political reasons.''

Liberals are privately disappointed that Bowen's proposal would provide no government health insurance for two other kinds of long-term care: nearly all nursing-home stays for the elderly, and long-term care for persons too young for medicare. Bowen would recommend help in these two areas through a system of tax initiatives intended to spur private insurance companies to develop long-term care insurance policies, and to allow individual Americans to establish tax-sheltered accounts, like individual retirement accounts, which could be used only for nursing-home care; in the event of decease, the latter funds would revert to heirs.

Yet liberals can be expected to support the Bowen proposal as a first step, which some privately call it. Sen. Edward M. Kennedy (D) of Massachusetts, long a proponent of increased government financing of health care, carefully calls the secretary's plan ``a major step in a new direction for the administration on this issue, and I look forward to working with him [to develop] comprehensive legislation to meet these needs.''

The American Association of Retired Persons calls Bowen's proposal to fund expensive acute-care medical costs (such as post-surgery expenses) ``a step in the right direction.'' But the AARP, the largest organization representing Americans over age 50, says that ``the most critical need ... rests with the problem of long-term care,'' such as nursing-home costs. ``Long-term care needs almost inevitably lead to catastrophic expenses because the costs of extended nursing-home care, home health care, and related services are enormous.''

A patient in a nursing home, for instance, may pay $22,000 a year, and most elderly nursing-home patients are there to obtain long-term care, what the government refers to as ``custodial'' care. Yet medicare, and most private insurance policies (called medigap) designed to supplement medicare, do not pay such long-term costs.

Bowen would attack this problem in three ways: tell the public that medicare and medigap don't cover long-term care, ``encourage personal savings for long-term care,'' and ``encourage the development of private long-term care insurance.''

The AARP holds that developing such private insurance plans is a good idea for future generations, but that solutions for today's older Americans are needed now. It seeks a medicare that pays the costs of long-term care, as it does for much post-surgery care. This is the kind of broadening that conservatives, who cite concerns about costs, fear that congressional liberals will try to institute next year.

Whatever recommendations grow out of the Bowen proposal, health insurance is likely to play a major role in domestic issues considered by the next Congress.