The Medicare program would be divided into four delivery options under a program being developed by the Republican House Ways and Means Committee staff, according to sources familiar with the plan.
The move is part of a larger GOP strategy to move more Medicare beneficiaries out of fee-for-service plans, which they contend cost the federal government more than managed-care plans. The hope is that such a switch will restrain Medicare spending, one of the fastest-growing portions of the federal budget.
One option for beneficiaries would be to remain in the current fee-for-service plan, but with additional copayments and deductibles. There also would be higher cost sharing for services such as home healthcare and procedures done on an outpatient basis.
Beneficiaries could also choose to join a managed-care plan. The proposal would increase the number and types of managed-care plans available in the Medicare market. Plans would be paid on a capitated basis. The payment schedule would be established through a regional competitive bidding system. After the price is determined, any managed-care firm willing to accept the schedule would be allowed to offer its product in the service area.
The third option available to beneficiaries would be to remain in their employer's plan, with Medicare picking up part of the cost. HCFA would contribute on behalf of the Medicare beneficiary an amount equal to the managed-care capitated rate.
Finally, beneficiaries could choose a medical savings account and purchase a high-deductible catastrophic policy to cover larger expenses.
Ways and Means health subcommittee Chairman William Thomas (R-Calif.) is expected to introduce legislation to carry out the plan next month.
Provider groups were guardedly optimistic about the plan.
"We have to be bold in reforming Medicare, and anything that gives beneficiaries additional choice is positive," said Richard Pollack, executive vice president of federal relations at the American Hospital Association. "However, the notion that this takes the cost pressure off (the system) isn't true."
Democrats were less enthusiastic about the proposal.
"If they want to increase copayments and deductibles, that is great for (Democrats) politically, but my nightmare is that they will `voucherize' Medicare and then restrain the growth of the vouchers," said one Democratic aide who asked not to be identified.
In a related matter, Senate Budget Committee staff told provider lobbyists last week that Budget Committee Chairman Pete Domenici (R-N.M.) would propose $297 billion in Medicare spending reductions over a seven-year period when he releases his budget plan later this month.
He will propose that an additional $179 billion be saved from the Medi-caid program over seven years by capping the growth rate in Medicaid at 8% in the first year and then gradually cutting that rate to 4% during the remainder of the budget period.
The Congressional Budget Office estimates that Medicare will spend $196 billion in 1996, while the federal portion of Medicaid will reach $100 billion.
Alternatives that would be available to Medicare beneficiaries under the Republican plan being drafted by the House Ways and Means Committee
Traditional fee-for-service. This would essentially be the same as the current Medicare program but with higher cost sharing for beneficiaries.
Managed care. The number of managed-care plans and types of plans available to beneficiaries would be expanded.
Employer plans. Beneficiaries would be given the option of remaining in their employers' plan after they become Medicare-eligible.
Medical savings accounts. Beneficiaries would purchase a high-deductible catastrophic policy to cover high-cost procedures.