The Clinton administration and House lawmakers are considering a plan to require providers to give Medicare their lowest discount on patient services.
HCFA Administrator Bruce Vladeck disclosed the plan last week during a briefing with Washington reporters. He called the proposal "Medicare Most-Favored-Nation Status" and said it was designed to allow Medicare to take advantage of the deep discounts being negotiated by private managed-care plans.
The proposal is being weighed at a time in which the administration and congressional Democrats are under intense political pressure-largely because of the Republican sweep in last November's elections-to find ways to reduce the federal deficit.
There were no preliminary estimates of what the new proposal might save the government, which paid hospitals about $80 billion through Medicare in 1994.
According to Vladeck, after years in which Medicare paid less on average than private customers, the growth of managed care has led to a reversal. Now, the government shells out more for care than private payers in some areas.
However, Vladeck's assertion is contradicted by data from the Prospective Payment Assessment Commission and the Physician Payment Review Commission. Those congressional advisory panels say such instances are few.
The day after Vladeck's remarks, Rep. Fortney "Pete" Stark (D-Calif.), the ranking minority member on the House Ways and Means health subcommittee, said he supported the proposal. An aide to Stark confirmed that House Democrats and the Clinton administration had begun work on the plan but said that no estimates were available of how much it might save the Medicare program.
"Why should Medicare pay a hospital more than it is willing to take from others?" Stark asked Federation of American Health System President Thomas Scully. Scully was testifying last week before the subcommittee.
Scully warned that while he supported allowing the Medicare system to competitively bid for services, merely giving them the lowest price available would not result in lower Medicare spending. Instead, Scully warned, providers would likely raise the prices charged to managed-care plans to avoid giving similar discounts to the much-larger Medicare program.
The federal government's first major foray into required discounts came when it forced prescription drug manufacturers to give the Medicaid program a rate equal to the best rate it gave other payers. At the time the law was enacted in 1990, the Department of Veterans Affairs and some private managed-care plans received discounts of nearly 30%.
However, according to several General Accounting Office studies, rather than lowering the price given to the Medicaid program, drug manufacturers instead reduced the discounts given to other payers. According to the GAO, the VA spent 21% more on drugs the year after the law took effect.