The Massive Healthcare Entitlement We Passed and Repealed 24 Years Ago

This is from Carl Hulse writing in the New York Times:

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. ...

Angry older voters stormed a car carrying Representative Dan Rostenkowski.

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.

“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.” ...

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.

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 I.R.S. 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.

“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.

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. ...

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. ...