Clinton Seeks to Save Medicare $138 Billion

WASHINGTON —  The Clinton administration proposed a package of Medicare reforms Tuesday that would save $138 billion over six years through modest premium increases for beneficiaries and reductions in the growth of payments to doctors, hospitals and health maintenance organizations.

The plan would extend until 2006 the financial life of the Medicare hospital trust fund, which currently is projected to run out of money in 2001. The savings, to be included in the proposed budget the president will release next month, provides the Medicare savings as a key element of his plan to balance the federal budget by the year 2002.

The financial pressure on Medicare is one of the nation’s leading domestic issues. But the president’s proposal, if approved by Congress, would provide only interim financial relief. The plan does not deal with a menacing long-range problem: financing medical care for the millions of baby boomers who will become eligible for Medicare starting in 2011.

“We believe there are substantial savings to be made in the Medicare program and we’re going to offer ways of doing that,” President Clinton said.

Although Democrats hammered Republicans throughout the 1996 campaign over their proposed reductions in Medicare growth rates, Clinton sounded conciliatory Tuesday. “I want to meet them halfway on this and I want them to meet me halfway,” he said.

Republicans, feeling burned by Democratic charges in the 1996 campaign, have insisted that the president take the lead this time in calling for unpopular changes in the program. In one such change, the administration plan would make beneficiaries pay more for their Part B insurance, which helps pay for doctor bills. The premium is now $43.80 a month, which covers about 25% of the program’s cost (the rest of the money comes from general tax revenues).

The premium was scheduled to decline as a percentage of total costs after 1998. Beneficiaries would pay $51.50 a month by the year 2002 under current law. But the president is calling for a law that would extend the 25% rate, and this would set the premium at an estimated $61.90 in 2002.

The change would mean $18 billion in additional payments by beneficiaries over six years. When Republicans made a similar proposal in 1995, they were vigorously criticized by the administration.

Clinton’s target of $138 billion was larger than the $124 billion in savings he proposed last year, when the White House and Congress failed to reach a deal on Medicare, which serves 38 million people--those aged 65 and over and the disabled. The Republicans had offered a plan to save $270 billion.

The GOP response to Clinton’s plan was cordial but cautious. “I am very encouraged by President Clinton’s decision today to meet Republicans halfway on the Medicare savings level,” said Rep. Bill Archer (R-Texas), chairman of the House Ways and Means Committee, which handles Medicare legislation.

“This is a very positive and very significant development,” he said, promising to “withhold final judgment until I see the details of the budget.”

Senate Majority Leader Trent Lott (R-Miss.) said he was pleased with the president’s new, “more realistic estimate of the savings needed” to assure solvency.

To make the plan attractive to beneficiaries, the administration is proposing Medicare coverage for the first time for colorectal screening and diabetes management. Medicare would also pay for annual mammograms and would increase payments to doctors for immunizations “to ensure that seniors are protected from pneumonia, influenza and hepatitis,” according to a summary of the president’s plan.

Medicare would also reduce co-payments for services received at hospitals and clinics on an outpatient basis. Because of a “flaw” in the payment system, many patients are paying 50% of the cost rather than the 20% co-payment normally required by Medicare, the summary document noted.

The plan would also offer a new benefit to help families caring for a victim of Alzheimer’s disease and provide additional consumer protections for Medicare beneficiaries who join HMOs.

Medicare would save $46 billion over six years by reducing the growth in payments to HMOs, which now serve about 4 million beneficiaries.

The administration wants to control the runaway spending in home health care, the fastest-growing part of Medicare. The budget proposal seeks $20 billion in savings through new cost controls.

“Originally designed as an acute care service for beneficiaries who had been hospitalized, home health care has increasingly become a chronic care benefit not linked to hospitalization,” according to the administration’s summary of the plan.

A slowdown in the growth of payments to doctors would save Medicare $10 billion. The formulas for hospital payments would be modified to save another $45 billion.

About $9 billion would come from an attack on fraud and abuse, and $8 billion would be saved through new controls on payments to skilled nursing facilities.