Senate Republicans out to erase the federal deficit unveiled options Monday for saving money by braking Medicare’s growth, giving states more power over Medicaid and welfare, and trimming other benefits.
Included is a plan for altering the way the government calculates inflation, a change that would shrink costof-living increases to beneficiaries of many programs, including Social Security.
The suggestions, compiled by a Senate GOP task force seeking savings in the mammoth programs, would cut projected spending by nearly $500 billion over five years. They would affect tens of millions of Americans and, if pursued, ignite a bitter political struggle with Democrats, advocates for seniors and others who have long defended the targeted programs.
“Hopefully, these proposals will not cause a buckling of political knees, but rather help pave the way to better programs, smaller and more efficient government, and a balanced budget,” said the draft report of the task force headed by Sen. Judd Gregg, R-N.H.
The immediate response offered by Martin Corry, chief lobbyist for the American Association of Retired Persons: “You can expect to see strenuous objections.”
The plans, being studied by Senate Majority Leader Bob Dole, R-Kan., and other party leaders, inject the Senate into the GOP deficitreduction effort the House has so far dominated. Republicans controlling both chambers say they will produce plans this spring paving the way to a balanced budget by the year 2002.
They also provide the first specific look at how Senate Republicans might trim benefit programs, which comprise half the $1.5 trillion budget and are its fastest-growing component. House committees have so far approved cuts in welfare, school lunches and food stamps.
Gregg was asked to find $385 billion worth of benefit savings over five years. Instead, he found reductions ranging between $475 billion and $495 billion. In an indication of how politically sensitive the proposals are, task force members suggested that in the end, only the amount absolutely needed would be approved.
One of the most controversial proposals would change the way inflation is calculated. Federal Reserve Chairman Alan Greenspan and other experts say the current system overstates the inflation rate by up to 1.5 percentage points. But others say the plan would simply let Republicans lower benefits while blaming bureaucrats.
The idea would save the government money because there would be lower yearly cost-of-living increases in payments to beneficiaries of many programs. In addition, tax brackets which are reset for inflation annually would rise more slowly, causing more people to pay higher tax rates and boosting revenue collections.
This change would raise a $64 billion for the government over five years, about one-third of it coming from lower cost-of-living adjustments for Social Security recipients.
“It works out to a 10 cents a day miscalculation that most seniors are seeing,” said Gregg. “I don’t know many people who in the name of fairness will take the 10 cents.”
Greenspan says current cost of living calculations - while overstating inflation in general - actually understate the situation faced by the elderly, who spend more for medical care than other people do.
Another suggestion would require elderly Medicare recipients to pay one-fifth of their costs for home health coverage. They currently pay nothing extra for the coverage, in an effort to encourage them to live at home and not in costly nursing homes.
The proposal would cost the average beneficiary $1,200 annually by the year 2000, and the most heavily hit would be low-income women over age 75, Corry said.
xxxx PROPOSED SAVINGS Highlights of possible savings in benefit programs suggested by a Senate Republican task force headed by Sen. Judd Gregg, R-N.H.: Medicare. Maintains current system but increases costs for users. Beneficiaries who today pay nothing extra for their home-health and laboratory costs would pay 20 percent. Monthly premiums for doctor care would rise with income. Reduced reimbursements to hospitals, doctors. Also creates new “Choice Care” managed-care system for seniors wishing to participate. Elderly people would get a check to cover their medical expenses, could keep threefourths of any amount they don’t spend. Medicaid. Block grants to states, hold current 10.5 percent annual increases to 4 percent, allow governors flexibility to design own systems. Welfare. Slow growth to $40 billion annually, block grants to states allowing local flexibility. Slow growth of Supplemental Security Income, serving elderly, blind and disabled poor, by halting payments to drug addicts, alcoholics, people with behavioral or emotional disabilities. Federal retirement benefits. Annual cost-of-living adjustments limited to increases given Social Security recipients. Increase civil servants’ retirement contributions by 2 percent of their salaries. Other programs. Lower target prices by 3 percent for farmers; halt payments for future non-service related injuries to veterans; require two-week wait for jobless people to collect first benefits; increase national park entrance fees; increase rates charged for student loans; end public funding of presidential conventions. Associated Press