Ronald Reagan picture

Radio Address to the Nation on Catastrophic Illness Medical Insurance

July 25, 1987

My fellow Americans:

Few tragedies hurt American families more than catastrophic illness among our elderly. First, there's the human and emotional cost of caring for a loved one who's severely ill; and then there's the financial cost, one that can frequently wipe out the hard work and savings of a lifetime. It was to do something about this tragedy that I proposed legislation earlier this year that would provide catastrophic health insurance for our elderly.

It's a responsible program that would limit annual personal expenses for Medicare acute care services to $2,000. Beyond that point, Medicare would pay for unlimited physician care and time in the hospital. The cost would be under $6 a month, or $70 next year, in Medicare premiums. Although the premiums, as the years go by, would rise to keep pace with program costs, they would remain affordable. Here then was a sound program that would take care of the national tragedy of catastrophic illness among the elderly. A program, too, that would be financially sound and not jeopardize the solvency of the basic Medicare system.

Then I submitted it to Congress. Unfortunately, this sound, reasonable program has been converted into a massive program that will impose a new tax on the elderly and soon threaten to bankrupt the Medicare trust fund. On Wednesday, the House of Representatives rejected a Republican-sponsored plan based on my proposal. Instead, they passed a bill that will cost over $10 billion in 1989 and nearly $100 billion by 2005—more than three times what my plan would cost. The House threw out the basic affordable premium of under $6 per month and replaced it with a surtax on beneficiaries' income tax of up to $580 per year. That means an elderly person with a $6,000 to $14,000 income would have his or her marginal tax rates raised from 15 percent, as promised in last year's tax reform, to 22 percent in a single year—and by 1992, to 25 percent.

Put another way, a Medicare recipient with monthly income as low as $1,200 could have his or her income tax increased by $580 per year. But even this huge increase in taxes on the elderly isn't enough to finance the program. By 1995, the costs will be so great they will threaten the entire Medicare trust fund. And just after the start of the next century, in the year 2005, there will be a $20 billion shortfall—a shortfall that will have to be made up by more tax increases.

So, in summary, here's the situation: I promised Americans a plan that would protect you in your retirement years from financial devastation brought on by a catastrophic illness requiring prolonged hospitalization and medical care. I fulfilled that promise and in return the Democratic House more than tripled the costs, increased tax rates for virtually all elderly taxpayers, expanded the program so much that in about 15 years it will run a $20 billion deficit and threaten the solvency of the entire Medicare trust fund. And to top it off, Congress would have the elderly begin paying a year before starting the full plan.

I know all of this is upsetting, but let me stress that I don't think there's cause for pessimism. As perhaps most of you know, I've been out around the country lately, and everywhere I go I hear protests from people like you about the ways of Capitol Hill. I think the American people are doing a slow burn over Congress' failure to face up responsibly to the problems. And I think the public's temperature is going to rise even higher when it understands that Congress has been trifling with a plan to provide elderly Americans with insurance against catastrophic illness—a plan that can work without taxing the elderly into servitude.

As we move along throughout the summer and the start of next year, these issues will come increasingly into focus. I think it's then that a lot of Representatives will start realizing that Americans like you are disturbed by Congress' ways. But the health plan is not just another pork-barrel project we're arguing over. This is a fight about protecting the health of our senior citizens—come to think of it, citizens like me. And doing it in a way that doesn't bankrupt the elderly in the process.

So, be sure to tell your Representatives and Senators that you support the administration plan, not the high-taxing substitute for catastrophic health insurance. America's living conditions and health delivery systems have come a long way in the last half century. Let's keep that progress going, and let's do it in a fiscally sound way that protects our elderly citizens and their families from the tragedy of catastrophic illness.

Until next week, thanks for listening, and God bless you.

Note: The President spoke at 12:06 p.m. from Camp David, MD.

Ronald Reagan, Radio Address to the Nation on Catastrophic Illness Medical Insurance Online by Gerhard Peters and John T. Woolley, The American Presidency Project

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