Work begins on Medicare cutbacks
The congressional free-for-all over Medicare spending has begun again, but indications are that Republicans and President Clinton may be somewhat closer to a common ground. Several key Republicans have reacted favorably to the White House’s new Medicare proposal, which calls for $138 billion in cuts over six years. Highlights of Clinton’s new plan include:
• Extend the solvency of the Medicare Trust Fund to the year 2006.
• Add Medigap protections, such as open enrollment and prohibitions against excluding recipients for pre-existing conditions. This is seen as a means of encouraging more seniors to move into Medicare managed care plans.
• Reduce hospital updates and capital payments to save $45 billion over six years.
• Create new provider service networks encouraging hospitals and physicians to establish their own health plans to compete against Medicare HMOs.
• Provide $11 billion over five years in direct payments to academic health centers. Money for this would come from: eliminating medical education payments from the HMO reimbursement formula (those funds would instead go to academic health centers); gradually reducing HMO payment rates from the current 95% of fee-for-service programs to 90% (the reductions would not start until the year 2000); and indirect savings from cuts in the traditional fee-for-service program.
• Target $20 billion in savings over six years by creating a prospective payment system for home health.
• Split home health payments between Parts A and B. The first 100 home visits following a three-day hospital stay would be reimbursed by Part A. All other visits, including those not following hospitalization, would be reimbursed by Part B.
• Add $1 billion over six years to improve rural health.
Also, the Clinton administration and the Prospective Payment Assessment Commission (ProPAC), which advises Congress on Medicare Part A issues, are divided on Medicare payment increases for hospitals.
ProPAC is recommending no increase in Medicare prospective payment system payments or capital payments for fiscal 1998. The panel reasoned that hospital Medicare margins were 7.9% in 1995, the highest they have been in a decade. Proprietary hospitals had the highest margins, at 14.6%.
The prospective payment system is recommending a 2% increase for Medicare reimbursement for hospitals excluded from the PPS. However, the Clinton administration quickly assured hospitals that it will not seek to freeze reimbursement rates.
Donna Shalala, secretary of Health and Human Services, told an American Hospital Association gathering that there will be an increase, but it will be somewhat less than the prices for hospital goods and services.
Observers are predicting an increase of 1.5% less than those price increases, which are currently expected to be about 3%, leaving a "guess-at" increase of 1.5%. The rate increase approved last year was 0.5% below the price increases.
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