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Tuesday, June 29, 1999 Published at 20:39 GMT 21:39 UK

Business: The Economy

Clinton proposes Medicare reform

Using the budget surplus to boost medical care

US President Bill Clinton has put forward a new plan to use part of the US budget surplus to expand Medicare, the programme that provides health care for elderly Americans.

He said that he would propose a benefit to pay for 50% of the cost of prescription drugs up to $5,000 (£3,000) a year.

[ image: More people will be able to afford expensive drugs]
More people will be able to afford expensive drugs
Individuals would have to pay an extra insurance premium of between $20 and $90 a month to qualify for the scheme.

"At a time of soaring surpluses, no senior should end up in the hospital because they cannot afford the cost of drugs," the President told Congressional leaders.

Rising cost of health care

The rising cost of health care has threatened the solvency of the programme established in 1965 to provide government health insurance to 39m retired or disabled people.

And the costs are expected to rise even faster when some 70m "baby boomers" born after World War Two begin retiring early in the new century.

President Clinton is proposing to transfer some 15% of the projected government's projected budget surplus over the next decade and a half - some $794bn - to keep the programme solvent until the year 2027.

More competition

The plan also includes elements designed to boost competition and curb the rising cost of medical care.

Medical care providers, including the increasingly popular group health plans, would be required to make their charges clearer so an individual could easily compare costs.

The administration estimates those cost savings at $64.5bn, while the extra costs of prescription drugs amount to $118bn over the next ten years.

Other preventative health care costs, like breast cancer and prostate cancer screening, would be fully funded under the new proposals.

Second attempt at reform

The Clinton health care reform package is far more modest that the radical attempt made at the beginning of his first term.

Then, an attempt to extend health care coverage to all Americans backfired when the Republicans convinced voters that the plan was far too bureaucratic and would reduce consumer choice.

Although the growing budget surplus makes funding reform easier, there is little hope of bipartisan agreement this time either.

Dick Amey, Republican House Majority Leader said he was "a little bit concerned that (President Clinton is) now wanting to advance a partisan effort."

The Republican-controlled Congress would prefer a series of tax cuts.

But President Clinton has argued consistently that the budget surpluses must be used to save Social Security, the elderly pension system, and Medicare first.

"We must secure and modernise Medicare, and do it now," he said.

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