Washington Sharpens Scissors in Another Bid To Cut Medicare Costs

Now that President Clinton has submitted a budget proposal to Congress, a key question in the upcoming fiscal minuet is what to do about Medicare.

The nation's health-care program for the elderly is losing money fast. Its trustees estimate that Medicare's hospital insurance trust fund will run out of cash in 2001.

And that's just the short-term problem. Longer term, the program faces serious difficulties due to demographics. In 1995, there were 3.9 taxpayers for every Medicare beneficiary. By 2030, after millions of baby boomers have retired, there will only be 2.2 taxpayers for each Medicare beneficiary.

The task of fixing the program is complicated by bitter feelings left over from the fall election campaign, when President Clinton and Democrats hammered Republicans, claiming GOP Medicare-reform proposals would threaten the elderly's benefits. Republicans, keenly aware that Medicare's 38 million beneficiaries vote in large numbers, aren't about to get too far out in front again. So while a short-term fix will be negotiated, a long-term overhaul may have to be crafted by a bipartisan commission.

"The election's over. We've got a job to do now," says Rep. Bill Archer (R) of Texas, chairman of the House Ways and Means Committee. "And we cannot let this Congress go by without fixing Medicare at least for 10 years."

The president proposes cutting the program's projected growth by $138 billion over six years. Part of the savings would come by transferring home-health-care benefits from the hospital fund (Part A), which is funded by payroll taxes, to the physician insurance fund (Part B), which is paid out of general revenues. The rest would come from lowering payments to health-care providers.

The president increased his proposed cuts over his 1995 offer, which suggested trimming Medicare growth by $116 billion, compared with the $158 billion the Republicans were advocating. Mr. Clinton said in January his main goals were to "balance the budget, meet the Republicans halfway, and put 10 years on the life of the trust fund without a premium increase."

While Republicans welcome the president's increased flexibility, they oppose moving home health care from the hospital fund, especially since it would draw on general revenues with no way to fund the shift. "If the whole home-health-care program is moved from one trust fund to the other - which has a draw on the general Treasury - that's a shell game and not really addressing the serious problems," says Senate majority leader Trent Lott.

Republicans are also concerned about the effect of further squeezing providers, whose payments have been cut before. "I want to make sure we think through what the real impact of that sort of thing is going to be on health-care delivery, quality of delivery, and cost to the beneficiaries," Senator Lott says.

Nor is it clear that Clinton's proposed savings will be enough. The Congressional Budget Office says the program's growth must be cut from 8.6 percent to 3.4 percent if Medicare is to be solvent at the end of 10 years. Senate Budget Committee chairman Pete Domenici of New Mexico says Republicans will push to save between $170 billion and $190 billion.

Almost everyone agrees that wealthier beneficiaries will have to pay more for their Part B premiums (those for the physician insurance fund). But neither the White House nor congressional Republicans want to be the first to propose that.

Republicans and some Democrats would like to recreate Medicare as a system similar to that offered to federal employees. Under a bill sponsored by Sen. Judd Gregg (R) of New Hampshire, Medicare recipients could choose private-plan coverage options or remain in the traditional program. Among the choices would be HMOs (health maintenance organizations), preferred-provider organizations, fee-for-service plans, or physician-hospital organizations, which could not charge more than traditional Medicare for the same benefits. If the plan is less expensive than traditional Medicare, the beneficiary would get 75 percent of the difference, with 25 percent going to the hospital trust fund.

"Real Medicare reform will not occur by hitting a short-term target for savings, but in transforming the dynamics of Medicare payments in a way that introduces greater cost discipline and efficiency," Senator Gregg says.

In the end, however, Congress may have to hand over long-term reform to others. "I think all of us have pretty much agreed that we need a bipartisan commission who will come back and make recommendations," Representative Archer says.

Meanwhile, GOP leaders are keeping a wary eye out. "I'm going to watch things very closely," Lott says. "If it's going to be demagogued, if it's going to be totally politicized, then that will affect what we do and how we do it."