House Moves to Cut Surtax for Medicare Catastrophic Plan

THERE was a lot of chest thumping last July when Congress passed legislation providing the elderly with insurance for prolonged illness. Now, the original backers of the ``catastrophic health plan'' are trying to respond to sacks of letters from middle-class senior citizens complaining about the high cost of the medicare program. This week, the House Ways and Means Committee started on the road to appeasing the letter writers who are especially angry about a $22.50 surtax for each $150 of income tax they pay. Dan Rostenkowski (D) of Illinois, chairman of the Ways and Means Committee, proposed legislation that would drop the surtax to $7.50 per $150 of taxes.

The middle-class elderly who make $30,000 to $50,000 a year have been active in campaigning against the tax, which affects 40 percent of medicare beneficiaries. The surtax, which reaches a maximum of $800, and premiums are automatically withheld from social security checks.

While lowering the surtax, the Rostenkowski plan would raise premiums by $3.50 to a $31.90 annual total. For the optional part B program, which covers 80 percent of approved charges for physician and other outpatient services, the deductible would be increased from $1,370 to $1,500. The deductible for prescription-drug benefits would rise from $600 to $650. After a participant reaches the out-of-pocket cap, the government would pay 100 percent of medicare-approved charges.

On Wednesday, Sen. Lloyd Bentsen (D) of Texas, one of the original architects of the medicare expansion, told reporters he supported ``fine tuning'' the legislation.

``I want very much to see the premium reduced and will be working toward that end,'' he said. But he said reducing premiums would pare benefits, too.

Senator Bentsen said it's possible other options may be added, such as granting individuals with private plans the right to decline medicare's catastrophic coverage.

Only a year ago, Congress was trumpeting the bill, which covers 29 million elderly and 3 million disabled. The legislators listened to horror stories about how high hospital bills had decimated peoples' savings. The American Association of Retired Persons (AARP), with 40 million members, strongly supported the bill.

Although the plan only went into effect in January, costs are already higher than expected. Bentsen blamed this on the soaring expenses related to outpatient drugs. These amounts are ``grossly higher than anticipated,'' he said.