Like Shakespeare's tale of Macbeth, Congress' fiscal 1996 efforts to balance the federal budget turned out to be full of sound and fury, signifying nothing. The 1997 edition looks to be a repeat of this year-at least until after the elections.
Democrats have been gaining political points by charging that the reductions proposed in the GOP blueprint to balance the budget by 2002 would destroy the Medicare program. But new data have given Republicans ammunition for their argument that the deteriorating condition of the Medicare Part A trust fund requires tough action.
Congress has put Medicaid and welfare reform at the top of its agenda so serious action on the Medicare front would be put off until after election results are in.
But healthcare executives shouldn't fool themselves into thinking they can simply continue operating under the status quo. With Medicare now the Gold Standard of reimbursement, pressure is mounting to do something about the Part A trust fund.
Adding pressure to bring Medicare spending in line is government data released last week showing that overall healthcare spending grew more slowly in 1994 than in any year since 1964.
Bringing Medicare expenditures in line with private-sector patterns will be a key agenda item following the November elections.
The failure of Congress to enact a balanced-budget plan beginning in fiscal 1996 was a reflection of political cowardice, and healthcare systems are likely to pay a high price down the line for this lack of political will. To reduce the tide of federal red ink under the fiscal 1997 budget, Medicare spending faces reductions of between $124 billion (the president's plan) and $168 billion (the Republicans' plan) over six years. In Medicaid, Republicans continue to fight to eliminate the program's entitlement status, replacing it with a series of state coverage guarantees that could squeeze providers if state budgets are cut.
Administrators should be prepared for prospective payment system updates that fail to keep pace with overall inflation. The president has proposed marketbasket minus 1.5% through 2002; Republicans want marketbasket minus 2%. Either plan means millions of dollars less in payments for Medicare discharges over the period. Furthermore, both medical education and home healthcare funding are likely to be reined in.
While providers may be forced to swallow severe payment cuts, executives must push bigger sacrifice from beneficiaries, who under proposals by both sides would pay only 25% of the cost of Medicare Part B services, down from 31.5% last year.
Congress should quit using Medicare as a campaign issue and come up with a compromise plan that spreads the pain fairly among providers and recipients of Medicare services.