Clinton, Hill leaders to try to rescue Medicare; Health care program for elderly was hurt by 1997 cost-cutting


WASHINGTON -- At an ice-breaking budget summit today, President Clinton and congressional leaders are expected to begin to try to figure out how to repair the damage they did two years ago to Medicare.

As part of the Balanced Budget Act of 1997, changes in the popular health care program for the elderly and disabled slashed Medicare spending almost twice as deeply as anticipated -- producing $200 billion over five years and much of what is now projected as the federal budget surplus.

The squeeze is being felt throughout the health care system -- from hospitals to doctors, nursing homes, home health care agencies, managed-care insurance plans and manufacturers of medical equipment.

Medicare spending that was once growing at a rate of 11 percent a year decreased this year by 5 percent.

Medical institutions are going belly up, patients are going without the increased benefits and services that had been promised, and some patients with medically complicated cases are being turned away from facilities altogether.

"This is what happens when you take a hammer to something, when you should be using a surgical knife," said Bill Frist, a Tennessee Republican and the Senate's only physician.

"We're trying to micromanage a program that is too complex for a legislative body to have to tune, and fine tune and then retune."

Cuts were made to produce a specific amount of savings -- not necessarily because the money wasn't needed.

Major provisions were based on outdated information and confused by bad drafting, the bill's supporters concede.

The entire package was put together with more wishful thinking than insight into the likely impact.

Add to the mix what Congress calls the blunders and excessive zeal of the Clinton administration, and the result has been a disaster for the politically influential health care industry.

A hot issue

"We overdid it, it was too much, too fast, it just went too far," said Sen. Richard J. Durbin, an Illinois Democrat. "Boy, is it a hot issue. Oh, man!"

Clinton is expected to raise Medicare as one of the key issues this afternoon at a meeting with the top five leaders of Congress called by the president to begin negotiations intended to complete this year's budget work.

Republican and Democratic leaders as well as the White House are all backing hasty repairs to Medicare that would likely have to be included in whatever final budget deal emerges before Congress adjourns for the year.

Clinton offered some Medicare reforms in broader legislation earlier this year that GOP leaders decided was too ambitious.

"Whether these changes are done in the context of broader reform or a more narrow effort, we certainly think they need to be done this year," said Chris Jennings, a Clinton health care adviser.

In addition, the administration asked Congress yesterday to steer Medicare patients to certain doctors and hospitals that offer discounted prices, the New York Times reported. The medical providers would be expected to attract more patients, making up for the lower charges.

But many Republicans, as well as doctors and hospitals, argue that the government would steer patients to mediocre providers that offer the biggest discounts, the Times reported.

In the meantime, lots of fighting can be expected over how to finance the so-called Medicare "give backs."

Rep. Bill Thomas, a California Republican, has proposed a $9.4 billion package over five years that he says would be paid for from the budget surplus.

Is anything left?

But the White House is skeptical.

"They've spent that surplus about 13 times over already, so it's hard to believe they have anything left," Jennings said.

Senate Majority Leader Trent Lott, who complained that he hasn't been invited to meet with the president in three months, was wary of what Clinton might have up his sleeve.

"If [Clinton's purpose] is to try to get congressional Republicans to join an irresponsible scheme to spend Social Security [surplus money] and raise taxes, I don't think the president will find us a receptive audience," Lott said.

Budget negotiations between Clinton and the Republican-led Congress have never been easy. It took them 2 1/2 years of battling to produce the 1997 Balanced Budget Act.

Controlling costs

The good news, lawmakers say, is that they brought some much-needed discipline to a 35-year-old Medicare program that was costlier than it needed to be because of outdated payment methods.

"You have to remember that before we acted, Medicare was growing at the rate of 11 percent a year, spending more money than it was taking in" through the Medicare payroll tax, said Rep. Nancy L. Johnson, a Connecticut Republican active in the repair effort.

Now that Medicare spending is declining, taxes meant to support the health care program for about 40 million elderly or disabled Americans have become one of the major contributors to the federal budget surplus -- about $25 billion during the current fiscal year.

"They underestimated by half how much money the changes would produce," said Thomas A. Scully, president of the Federation of American Health Systems, which represents private, for-profit hospitals.

"Now the money is gone, and there's no getting it back. They've already spent the surplus."

Hospitals, homes close

Scully said more than 50 hospitals have closed, many of them in rural areas; nursing home chains have gone bankrupt; and many home health agencies and managed care plans have rejected Medicare patients.

In Maryland, residents of the 14 most rural counties will have no access next year to Medicare HMO plans, a program called Medicare Plus Choice. That option was supposed to provide more benefits -- such as prescription drug coverage -- than the traditional fee-for-service program, with lower out-of-pocket costs.

"Medicare Plus Choice just hasn't worked," observed Rep. Benjamin L. Cardin, a Baltimore Democrat active in health issues.

Administration officials acknowledge the problems but caution that some of the financial difficulty faced by health care providers might be the result of bad business decisions that have nothing to do with Medicare.

"We are concerned about reports on the financial conditions of some individual and chain providers," Michael Hash, deputy administrator of the Health Care Financing Administration, told a House subcommittee this month.

But he said it was essential to distinguish direct effects of the 1997 law from other factors, such as "discounted rates to other payers, aggressive competition and imprudent business decisions."

So far, more outcry has come from health care providers than from Medicare patients "because most of the changes are not being directly felt by the beneficiaries," said Tricia Smith of the American Association of Retired Persons.

But that might be only a matter of time.

Major contributors

Lawmakers are highly sensitive to complaints from medical providers who are among the most generous contributors to political campaigns.

The health industry ranked fifth last year in overall contributions to federal election committees, giving a total of $58.8 million -- 59 percent to Republicans and 41 percent to Democrats.

Vice President Al Gore and Hillary Rodham Clinton, both of whom are also raising money for election campaigns, support the Medicare repairs, Jennings observed.

Pub Date: 10/19/99

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