School Impact Likely If Medicare Changed
Washington--School districts that do not provide Medicare coverage for their employees may be forced to do so next year under a little-publicized measure being considered by the Senate late last week as part of an omnibus deficit-reduction bill.
Medicare is financed through the Social Security program and provides basic health-care benefits for retirees. According to the most recent national estimates, 30 percent of state and local government employees, many of whom are teachers, are not covered by Medicare because they do not belong to the Social Security program and rely on an independent retirement health-care plan.
Officials of teachers' unions are unanimously opposed to mandatory Medicare coverage because, they say, it will effectively lower salaries and force school districts to allocate scarce resources to pay their share of the Medicare tax.
By requiring public employees and their employers each to contribute 1.45 percent of employee salaries to Medicare, the federal government could raise $4.7 billion in additional revenue over the next three years, according to Congressional estimates.
A scheduled vote on the bill was postponed last week because of a dispute over trade issues. The Senate this week may resume consideration of the measure--a package of spending cuts and tax increases that is projected to save the government $85 billion over three years.
The omnibus deficit-reduction bill, S 1730, is a major part of Senate efforts to cut projected spending to meet goals Congress set for itself in this year's budget resolution.
The Senate bill would also trim the Guaranteed Student Loan program by $800 million over three years. A companion deficit-reduction bill passed by the House last week would cut aid to college students by requiring a financial-needs analysis for gsl's.
Freedom of Choice
The effects of the Medicare provision will be felt most by state and local governments that do not rely at all on Medicare but instead provide employees with an alternative retirement health-insurance plan.
In Ohio, for example, all of the state's 146,387 active school-district employees contribute 2 percent of their salaries toward a retirement health-insurance plan provided through their State Teachers' Retirement System.
The Ohio Education Association estimates that over $49 million in additional taxes would be withheld from the paychecks of district employees if this provision becomes law, with an equal amount coming from school-district budgets.
Ohio teachers do not want to have to pay for Medicare or substitute it for their present plan because their current coverage is among the best in the nation, according to Don Wilson, president of the oea, which represents more than 80,000 teachers.
There are eight other states in which fewer than 50 percent of public employees are currently covered by Medicare, according to the Department of Health and Human Services. They are California, Illinois, Massachusetts, Louisiana, Colorado, Maine, Alaska, and Nevada.
"They seem to be grabbing money wherever they can to meet their deficit-reduction target," said Jerry Morris, a legislative analyst for the American Federation of Teachers.
"This new tax is nothing short of an attempt to shift the burden of deficit reduction from the federal government to the state and local governments," said Senator Wendell H. Ford, Democrat of Kentucky, during floor debate on the bill.
Michael Casserly, legislative associate for the Council of Great City Schools, said providing the coverage would cost the growing Los Angeles school system $11 million the first year and $18 million the second. A smaller district such as Boston would face $2.5 million in increased payroll costs each year, he said.
School officials also complain that the Senate held no hearings on how the provision might affect existing retirement health plans.
Experts agreed that some plans would have to be restructured and that benefits would have to be cut for retirees if employee contributions dropped significantly.
That would be so in Ohio, according to C. James Grotehaus, director of the state's retirement plan.
Proponents of the bill say the issue is one of equity. Public employees should have to contribute to Medicare, they say, because 90 percent of those who are not contributing qualify for Medicare anyway because they are included under their spouses' membership in Social Security or because they meet the eligi-bility requirements through moonlighting in the private sector.
Mr. Grotehaus acknowledged that about 90 percent of retirees in the Ohio system meet the eligibility requirements for Medicare, but he said it is not fair to penalize them and not others who barely qualify.
Social Security Fears
Several union officials predicted that if Medicare coverage is made mandatory, Congress would then move within the next two years to require state and local employees to join the full Social Security system.
That was the case with federal employees, who were first brought into Medicare in 1984; a year later, new federal employees were required to join Social Security. The Congress is still weighing several bills to restructure the Civil Service system to compensate for its reduced funding base.
State and local government workers were prohibited from joining the Social Security system until 1951 because of legal concerns about the federal government taxing state governments.
"At first, public employees were locked out, and now it looks like they're going to be forced in," said Mr. Morris of the aft
The House is considering a measure that would mandate Medicare coverage only for state and local government employees hired after Dec. 31 of this year.
The House last week passed its version of a deficit-reduction bill but held out the Medicare and several other tax-related clauses for further study; Congressional aides say it is possible a conference committee could report a compromise bill back to the House with a mandatory Medicare provision.
President Reagan's aides have said they would recommend he veto the current Senate deficit-reduction package because it contains an extension of the extra 8-cent cigarette tax and other provisions the Administration opposes. A White House spokesman said the Administration has not taken a position on the mandatory Medicare provision.