GO
Loading...

Lesson Is Seen in Failure of 1989 Law on Medicare

In 1988, President Ronald Reagan had grown wary of the Medicare Catastrophic Coverage Act, but his vice president, George Bush, saw political advantage in it.
AP
In 1988, President Ronald Reagan had grown wary of the Medicare Catastrophic Coverage Act, but his vice president, George Bush, saw political advantage in it.

Angry Americans voice outrage at being asked to pay more for health coverage. Lawmakers and the White House say the public just doesn't appreciate the benefits of the new health law. Opponents clamor for repeal before the program fully kicks in.

The year was 1989, and the law was the Medicare Catastrophic Coverage Act, which was supposed to protect older Americans from bankruptcy due to medical bills. Instead it became a catastrophe for Democratic and Republican lawmakers, who learned the hard way that many older Americans did not want to be helped in that particular way.

Seventeen months after President Ronald Reagan signed the measure with Rose Garden fanfare, a series of miscalculations and missteps in passing the law became painfully evident, and it was unceremoniously stricken from the books by lawmakers who could not see its demise come quickly enough.

The tortured history of the catastrophic-care law is a cautionary tale in the context of the struggle over the new health law, the Affordable Care Act. It illustrates the political and policy hazards of presenting sweeping health system changes to consumers who might not be prepared for them. And it provides a rare example of lawmakers who were willing to jettison a big piece of social policy legislation when the political risks became too grave.

More from The New York Times:
Cutting the Heart Out of Health Reform
Obama Health Care Fixes Give Small Businesses Time to Assess
Does Individual Insurance Work?

"It has often been said that if you get an entitlement on the books, you can never get rid of it," said Bill Archer, who pushed to repeal the 1988 law as a senior Republican, from Texas, on the House Ways and Means Committee. "That is an example of a time we did get rid of it."

Backers of the Affordable Care Act say comparisons to the catastrophic-care debacle are flawed. They say that the new law fills a major health insurance void and that despite its current problems it will never meet the same fate as that undertaking in 1988.

"It has often been said that if you get an entitlement on the books, you can never get rid of it." -Former Rep. Bill Archer, R-Texas

"It is enormously different," said Ron Pollack, the executive director of Families USA, a liberal consumer advocacy group, who supported both the new health law and the catastrophic-care program. "You had a benefit totally paid for by 40 percent of the Medicare beneficiaries, who overwhelmingly thought there was not a benefit there for them. It is understandable they were upset."

(Read more: You think the Obamacare fight is ugly?)

Others involved with the passage and repeal of the Medicare Catastrophic Coverage Act see clear parallels with the current situation, in which a very vocal segment that views itself as harmed by the new law has joined with highly organized political operations to rally opposition to it.

"When I saw this massive thing, I said, 'Boy, if this is anything like catastrophic, they are going to be in trouble,' " said Brian J. Donnelly, who led the 1989 repeal effort as a Massachusetts Democrat on the Ways and Means Committee. "It is a very good analogy."

(Read more: Frist's answer to health-care costs)

The concept of expanding Medicare originated in the Reagan administration in 1986 under Otis R. Bowen, the secretary of health and human services, who proposed a modest change to add an annual premium while capping annual out-of-pocket costs for co-payments and hospitalization at $2,000. Politically, Republicans were looking for a way to offset damage from a proposal to delay Social Security increases.

Democrats, who controlled Congress, were not about to be outbid by Reagan when it came to a core constituency like retirees. As the Bowen plan moved through the House and the Senate, new benefits were tacked on, including premium protection for low-income Americans, help for spouses of nursing home residents and some limited prescription drug coverage, driving up the cost of the program.

(Read more: The Obamacare 'fix' is in: Now, where do we go from here?)

With the White House insisting that Medicare recipients pay the tab, the sponsors devised a sliding payment scale based on income that the Internal Revenue Service would collect. That approach shares some DNA with the current law, since the IRS is responsible for imposing penalties against people who do not buy insurance and for administering other aspects of the Affordable Care Act.

Wary of being accused of instituting a new tax, backers of the catastrophic-care bill chose to call the payment of up to $800 for individuals and $1,600 for couples a supplemental premium.

Aides to Reagan grew wary of the final product — approved 328 to 72 in the House and 86 to 11 in the Senate in the summer of 1988 — and pondered a veto. But Vice President George Bush, running for the top job that year, saw the measure as a potential political advantage, and it became law.

But not for long. The supplemental premium quickly became an issue as more affluent Medicare beneficiaries got wind of it. Many of those retirees already had some semblance of the new coverage and resented being asked to pay for it for others.

(Read more: Obamacare cost-cutting: CNBC Explains)

"It blew up," said Mr. Donnelly, who left the House, served as an ambassador and is now retired. "A lot of people in the United States already had this coverage. Almost every retired union member had the coverage through negotiated benefits."

In addition, the revenue from the new premium was projected to exceed what was needed and quickly build a surplus, feeding a perception that the catastrophic-care program was a backdoor route to reducing the deficit through a tax on retirees.

(Read more: Planning retirement? Don't forget Medicare costs)

To their chagrin, advocates and critics of the measure also discovered that many people who were supposed to be thrilled about the new plan misunderstood it and thought it was going to ease one of their great fears — the expense of living in a nursing home. When consumers came to realize that it did little to help with long-term care, enthusiasm dipped.

In a foreshadowing of the angry town hall-style meetings on health care in 2009, older voters began to protest the measure. They were inflamed by an aggressive direct-mail effort by the relatively new National Committee to Preserve Social Security and Medicare, which found itself fighting with the American Association of Retired Persons, a champion of the new law.

The dramatic climax came on Sept. 17, 1989, when Representative Dan Rostenkowski, the gruff and burly chairman of the Ways and Means Committee, was hectored in his Chicago district by a band of angry older voters. They surrounded and blocked his car and forced him to escape on foot before he could make his automotive getaway. A news crew caught the episode on camera.

The handwriting was on the wall. Authors of the bill tried to salvage it, but the House voted on Oct. 4, 1989, to repeal almost all of it. The Senate tried to retain the benefits but eliminate the supplemental premium. The House balked, leading to another vote to repeal in November 1989, as House members sat in the chamber with coats in their laps, eager to head home for the holidays.

(Read more: Health insurance exchanges: CNBC Explains)

The experience made many lawmakers gun-shy about health care and slowed major policy changes for years until the approval of the Medicare prescription drug benefit in 2003 and the health care law now taking effect.

Mr. Pollack and others dismiss the notion that President Obama's health care law could be similarly repealed if the backlash becomes overwhelming, arguing that the costs are spread among many people and that the benefits flow to too many for it to be reversed. Many aspects of the law are already being widely taken advantage of, such as the ability to keep dependents on a family's health plan until age 26.

Mr. Archer agreed.

"This Congress and this president are too committed to it," he said. "But maybe if you get a few white-haired women to jump on the hood of someone's car, it might change things."

—By Carl Hulse, The New York Times.

Featured

Health Care

Politics

White House