Health plan may include Medicare Elderly must be added to new system to control costs, Clinton aides say


WASHINGTON -- President Clinton's health-policy advisers have been developing plans to incorporate Medicare into a new health care system, even as they have assured elderly people that no major changes in Medicare were imminent.

Although they know they risk creating a political outcry from elderly people who fear major changes in a crucial safety net, administration officials say it will be difficult to control health costs if people 65 and older remain outside the new system. Officials also hope to offer additional benefits, such as lower co-payments, to elderly people in the new system, making the change more attractive.

Medicare finances health care for 32 million elderly and 3.6 million disabled people, at a cost of more than $140 billion a year. It accounts for 15 percent of all health spending in the United States, including 40 percent of the revenue that hospitals receive from the care of patients.

Efforts to curb its growth by regulating hospital and doctor fees have largely been frustrated by increases in the use of medical services, and rising Medicare bills are an important contributor to the federal budget deficit.

In recent weeks, the administration's thinking about how to restructure the health care system has grown steadily more comprehensive, more sweeping and more ambitious.

White House officials confirm that they intend to propose incorporating workers' compensation, the medical portion of automobile insurance and Medicaid, the health program for the poor.

Medicare is bigger than the other programs, and its beneficiaries are a well-organized political force, at the center of the existing health care system. So the future of Medicare is important to the president's proposal.

A powerful organization that represents many elderly people reacted cautiously last night.

Martin A. Corry, director of federal affairs at the American Association of Retired Persons, said, "Whenever you talk about changes in Medicare, it makes people nervous."

He said it was fine for the government to give elderly people incentives to enroll voluntarily in health-maintenance organizations. But he warned: "Dropping Medicare into an untested new system, based on an unproved theory about how to deliver health care, would be very controversial. Before we do that, we ought to make sure the new system works."

Under the administration proposals, which are to be submitted to Congress in June, most people under 65 would obtain private health insurance coverage through large consumer cooperatives that offer a range of health plans.

The lower-cost plans would resemble health maintenance organizations, which provide all care for a preset fee and require use of particular doctors and hospitals.

People would retain this coverage when they turned 65. And in the proposals now being discussed, people already on the Medicare rolls would be strongly encouraged, through a variety of incentives and penalties, to join HMOs.

The National Governors' Association has urged the White House to fold Medicare into the new health care system. In many rural areas, a large proportion of the population is elderly. Governors fear that in such areas there will not be enough patients to sustain health-care networks if the elderly are excluded. One-fourth of the nation's population lives in rural areas.

At a conference of state legislators Saturday, Ira C. Magaziner, manager of the President's Task Force on National Health Care Reform, said the administration wanted Medicare brought into the new system "on a state-by-state basis."

Hillary Rodham Clinton, head of the task force, has told members of Congress that Medicare beneficiaries should be brought into the new networks of doctors and hospitals as quickly as possible.

Confidential work papers from the task force say that Medicare beneficiaries may have to pay more if they insist on getting care through standard fee-for-service arrangements.

Under such arrangements, the government pays separately for each hospital admission and each service performed in a doctor's office. Under the new system, elderly people might get some extra benefits, possibly including long-term care, if they joined HMOs, the papers say.

Only 2.4 million Medicare beneficiaries are now in HMOs. Elderly people have been reluctant to join HMOs, in part because they have become attached to certain doctors and are unwilling to change, and some HMOs in turn have been reluctant to sign up the elderly, in part because the HMOs consider Medicare payments too low.

But under the administration's plan, most doctors would be affiliated with a HMO or a similar network of health care providers, and elderly patients may well be able to follow their longtime physicians.

The elderly may also see an advantage to joining the new system if by joining an HMO they can get extra benefits like lower co-payments or coverage of prescription drugs, reducing the need for supplementary insurance, or Medigap policies.

Administration officials with long experience in Washington have advised Mrs. Clinton to proceed with utmost caution in proposing changes in Medicare. Aides to Democratic congressional leaders have offered similar advice. Older people are a politically powerful group with a high turnout rate in elections, and they have punished politicians whom they saw as tampering with Medicare.

Administration officials acknowledge that they played down the possibility of changes in Medicare to avoid alarming the elderly. Presumably, the White House wanted to refine its proposals and develop a public relations strategy before openly discussing its ideas.

Robert O. Boorstin, a spokesman for the task force, has refused to discuss its work on Medicare.

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