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Executive Summary

CATASTROPHIC CARE MID-MAY HEARINGS PLANNED BY SENATE FINANCE Committee; the hearings are likely to focus on the benefits' new income-related supplemental premium, which has been the target of beneficiary complaints and of sparring between committee Chairman Bentsen (D-Tex.) and Rep. Rostenkowski (D-Ill.) and the Bush Administration. The latest round in the debate over the premiums was the April 28 release of a statement by Bentsen that asserts: "Everyone now agrees the technicians made some mistakes in their original estimates and the [catastrophic care funding] surplus will be bigger than expected. But the Administration is continuing its long-standing argument with Congress over how big the surplus should be." He adds: "No one wants to see older Americans pay more than they have to for this new health insurance and even if you accept the Administration's lower estimate, we're still looking at an increase of approximately 50% in surplus revenues." An April 27 letter from Treasury Secretary Nicholas Brady to Bentsen supports the Administration position that the program should not be changed. The senator had requested Treasury to confirm whether its estimates are in line with those of the Congressional Budget Office. "We have reviewed our data and revenue model and do not find that there is reason to change the revenue estimates of the Medicare Catastrophic Coverage Act made last winter, which were incorporated in the President's 1990 budget," the letter advises. "These estimates, though not new, are in fact different from those made at the time the legislation was passed. "The Congressional Budget Office estimate of these receipts over the five-year (1989-1993) period was revised upward by $ 4.4 bil. in February from the $ 35 bil. estimated at the time of enactment," Brady continues. "Of that increase, about $ 4.2 bil. is attributable to higher income-related premiums and $ 0.2 bil. to higher flat premiums." Brady explains that the Administration's FY 1990 budget plan "included an upward revision over the five-year period of $ 4.3 bil. in receipts for this program from the $ 37.4 bil. estimate at the time of enactment. Nearly all of this increase, however, is attributable to a revised estimate in the portion of tax liability collected through estimated tax payments. The revision results in increased collections in 1989-1993, but not significant change in total tax liability to individuals." Treasury stressed that the Administration's outlay estimates are "significantly higher" than CBO's. The Administration, Brady said, "expects the margin of receipts over outlays at the end of 1993 to be only $ 6.2 bil. compared to CBO's forecast of $ 9.1 bil. Both the CBO and Administration estimates were made during the budget process and are included in the baseline of our respective budgets."

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