In his State of the Union address last month, President Clinton put forward the idea of allowing the 'near elderly' - those between the ages of 55 and 64 - to buy into Medicare.

People over 65 are automatically covered by the federal Medicare health insurance programme. It is estimated that there are 3 million uninsured people in the 55-64 age range. Congress has already approved the allocation of $24bn to provide health insurance for the 10 million children in the US without cover, making the near elderly a significant new group - though by no means the largest - without cover (see table).

It is believed that many of the uninsured in this age group have lost their health cover through corporate downsizing or early retirement, and yet they have a significant amount of chronic disease. It is estimated that 13.4 per cent of those in this age group don't have health insurance, half the rate of uninsurance for those aged 21-29.

The proposal was leaked and received mixed reviews. On the one hand there was a general wariness of creating a new entitlement programme given the already precarious state of Medicare financing, while on the other the size of the group was perceived to be small enough to limit the fiscal implications.

The New York Times wrote that '...the White House is right to try to help a vulnerable group', while the Christian Science Monitor called the idea 'fiscally irresponsible and illogical'.

The president is proposing to allow all Americans aged 62-64 (900,000 people who are currently uninsured) to buy into the programme through payments estimated at $300-$400 a month. In addition, workers aged 55- 64 who have been displaced through downsizing, or whose employers have reneged on promises to continue insurance cover until they reach Medicare age, would be allowed to buy into the programme.

The administration has estimated that only 300,000 people might take the opportunity to 'buy in' given the high purchase price. It claims that the programme would be entirely self-funded after a start-up period of four to five years.

The ultimate cost to the programme is a crucial issue given the overall solvency problems confronting Medicare; and many who have criticised the proposed programme have focused on the issue of the long-term impact on its finances.

It has been suggested that the wider political objective behind the proposal was to allow the new Medicare Commission to increase the age of eligibility for Medicare from 65 to 67 or beyond. By having a mechanism in place which allows people to buy into the programme, it would be much easier to implement an increase in the general start date of Medicare for most people.

However, many critics maintain that, given the cost of the proposed premiums ($3,600-$4,800 per year), and the options that currently exist for people in this age group to buy insurance, there may be an 'adverse selection' in which only the sickest people will buy into the programme and in doing so increase its overall costs. They argue that in this case the government would be more likely to choose to subsidise the programme than raise the premium to unaffordable levels.

The administration has suggested that if its proposal is adopted, and if the premiums turn out to be inadequate, it would allow those who have bought into the programme to continue to pay a $10-$20 per month surcharge once they reach the age of 65 for every year they have participated in the programme.

In this scenario, someone who began to 'buy in' at the age of 60 would pay this surcharge for five years. This proposal, too, has raised hackles since some people are wary of establishing a precedent whereby people in the Medicare programme pay surcharges, and some worry that those who are really sick might die before they have payed back the programme in full.

Medicare issues always focus on the solvency of the programme and the unwillingness of Congress and the president to make major changes that will hit elderly voters, who are extremely powerful.

Since the issue of universal coverage seems to be off the agenda entirely, and the lack of health insurance for children has been addressed, there are only incremental ways to boost the number of insured. As the table shows, the age group the president has selected has by no means the highest rate of uninsurance. Yet there is an easy mechanism by which this group could be insured. So, independent of need and cost, what will ultimately happen will be based on political expediency. At the same time, reducing the number of uninsured Americans by any means reduces the overall magnitude of the problem and allows other approaches to be considered.

Government figures show that in 1996 healthcare costs were just over $1trillion. After three years of price moderation, health insurance premiums are expected to begin to increase at double to triple the rate of inflation, and this will put the issue of healthcare costs back on the national agenda.

Given that the national budget deficit is on its way out, either the administration can give money back to people in tax cuts or increase the level of service provision, including better health cover. This debate will be playing out this year, and the Medicare debate will be one of the central battle lines.

Howard Berliner is associate professor and chair, health services management and policy, New School for Social Research, New York.

'The age group selected

by the president has by no means the highest rate of uninsurance. Yet there is an easy

mechanism by which it could be insured. So independent of need and cost, what will ultimately happen will be based on political expediency'