A place in history.
That, according to the political grapevine, is what Bill Clinton's second term as president will be all about.
Washington insiders report that having failed to secure his political monument through national health insurance, the president will now try to accomplish what no chief executive has managed to do in nearly three decades: balance the federal budget.
The prospect has many in the healthcare industry worried they will be the slaves who build Clinton's pyramid.
"The one sure thing is that there will be some provider cuts; that's easy," predicts Frederick Graefe, a healthcare lawyer with Baker & Hostetler in Washington.
Even if an agreement to balance the budget over several years is not achieved, there almost certainly will be a strong push to slash the deficit. And with Medicare and Medicaid eating up major portions of the federal budget, any effort to bring revenues in line with spending will require painful chopping of provider payments. That is especially true of Medicare, which accounts for 12% of more than $1.6 trillion in annual federal spending.
In addition, a stringent fiscal diet means there would be precious little money available for expansion of programs, even though both Clinton and Republican leaders have advocated increasing healthcare access for children.
Signs of progress. Whether anything positive or negative will be achieved in the next four years is anyone's guess, but there are signs that something might be accomplished, even if it is painful to providers.
One of the principal reasons why Clinton will pursue a balanced budget is it's one of the few areas in which he and Republicans might agree. There was no consensus on healthcare reform in Clinton's first term, and voters last year chose to retain a divided government with a GOP-controlled Congress. Republicans again have vowed to push for a balanced-budget amendment to the Constitution, and Clinton again has vowed to fight it; but both sides see a budget agreement as being in their best interests.
Last year, after numerous nasty budget battles, lawmakers and the White House did manage to eke out agreements on welfare, immigration and health insurance reform. Those successes, and polls showing the American public is sick of political bickering, have Republicans and Democrats talking bipartisanship. House Speaker Newt Gingrich (R-Ga.) has said lawmakers have a "moral responsibility" to work together. Senate Majority Leader Trent Lott (R-Miss.) has echoed the bipartisan sentiments.
Still, the ethics investigations against Gingrich and a potentially ugly round of hearings on White House campaign contributions are unlikely to bring the two parties closer together.
"If they all get caught up in investigations and subpoenas, then action will pretty much grind to a halt," says James Scott, president of the Premier Institute in Washington.
The same fundamental gaps also remain in party philosophies in areas such as federal-vs.-state control of Medicaid that torpedoed the budget negotiations last year.
"There is no reason to believe that some of the policy differences that held up an agreement before have been bridged," says Richard Pollack, executive vice president of federal affairs at the American Hospital Association.
But assuming that cooperation reigns, Congress and the White House are likely to address four broad areas: Medicare, Medicaid, access to care and managed care.
This is the most significant, and in many ways the most challenging, of all the issues facing federal lawmakers. Linking Medicare reform to a balanced budget-if the public would go along-could allow lawmakers to make most of the changes they unsuccessfully sought last year. It could allow them to mix the medicine of payment reductions to providers with the sugar of program reforms to give some providers a bigger piece of the Medicare pie.
Last year, the White House proposed reducing projected Medicare spending by $124 billion over six years, while Republican lawmakers sought $158 billion in savings.
This year, Republicans have made it clear they will wait for the president to make the first move on Medicare reform and work from his proposal. Clinton did so last week when he announced he will seek $138 billion in Medicare savings over six years. He described the decision as a bipartisan gesture to Republicans to make it easier to agree on a budget plan. The president offered no other details of his proposal.
The difference is that while last year some of the pain was inflicted on Medicare beneficiaries in the form of higher copayments and deductibles, this time seniors are off limits. That's because of the last election, in which Clinton scored political points by bashing Republicans for trying to increase beneficiary costs.
"At this time neither side is interested in anything other than maintaining the current cost structure for beneficiaries," says Martin Corry, director of federal affairs for the American Association of Retired Persons.
Exempting beneficiaries means the whole package of spending reductions must come from payments to providers.
"It is possible that even though the total level of cuts is less than last time, the pain for hospitals could be just as bad or worse," says Thomas Scully, president of the Federation of American Health Systems.
Both parties want to open the program to give seniors a range of choices similar to those available to federal employees under the Federal Employees Health Benefit Plan.
Both Republicans and Democrats acknowledge that one option should be provider-sponsored organizations. Under the Medicare reform plan included in the budget legislation Congress passed in 1994, groups of hospitals, physicians and other providers would have been allowed to contract directly with Medicare and take capitated payments without having an insurance intermediary. That measure was vetoed by Clinton because of its spending restrictions.
While in theory there is little opposition to such networks, the real battleground will be over the terms and regulations under which the PSOs can operate. Hospital groups want PSOs to be regulated at the federal level, at least initially, to get around what they see as overly burdensome state regulation. Managed-care groups say the PSOs are acting like other managed-care plans and should be regulated as such.
One administration proposal that has both providers and insurers concerned is a reduction in the Medicare reimbursement rate for managed-care plans. Medicare currently pays plans 95% of the amount it spends on average for beneficiaries in traditional fee-for-service arrangements. Studies have shown that because managed-care plans enroll healthy beneficiaries who would otherwise cost Medicare less than average, the program actually ends up losing money on managed care. That could spur lawmakers to try to reduce payments below the 95% level, a move that would signal war on managed-care plans. Providers also are concerned because PSOs would be paid under the same formula.
One big question is whether federal lawmakers will try to enact the difficult Medicare reforms themselves or pass them off to a commission. The White House still says it supports a commission, but it is becoming increasingly isolated in its stand.
Provider groups and Republicans have criticized delaying action by appointing a separate panel. Even Senate Minority Leader Thomas Daschle (D-S.D.) says he would rather see Congress deal with the problem than hand control over to a third party.
If there is a commission, it's likely the budget still will include a package of Medicare spending cuts to keep the Medicare hospital trust fund on life support and buy lawmakers some additional time to enact reforms.
Defensive strategy. As for provider lobbyists, after years of fighting even the smallest Medicare spending reductions with grave predictions of beneficiary dislocation, they now acknowledge the climate has changed.
Provider groups say they are willing to do their part to balance the budget by accepting a reduction in the projected rate of growth in the Medicare program. While they won't say how large a price they are willing to pay, last Congress, the AHA and several other hospital groups endorsed a plan sponsored by a group of conservative Democrats that included more than $150 billion in reductions over seven years. The most current reports are that provider groups are unlikely to accept reductions exceeding about $120 billion over five years.
The providers' new strategy is to exact concessions from lawmakers in exchange for their support.
The first condition is that the pain be distributed equitably among doctors, hospitals, insurers and beneficiaries.
"You have to have a balanced approach that allows all the players to take their share," Pollack says.
Again, that isn't likely to happen because Republicans and Democrats have said that increases to beneficiary copayments and deductibles are off the table. The question then becomes the distribution among providers and insurers. That is when the real fight begins as each special-interest group tries to find a champion among the White House and Congress. The other condition is that providers receive something in return for accepting the spending reductions. What they want most are PSOs regulated at the federal level.
Prognosis: It's not hard to see 1997 degenerating into a morass of partisan sniping over ethics issues. Traditionally, the first year after a presidential election yields little in the way of legislation. But both sides really seem to want to reach an agreement.
For hospitals, the worst of all possible worlds is possible-that lawmakers will reduce Medicare Part A spending to rescue the trust fund for a few extra years without making any of the structural reforms hospitals say they need to be able to absorb such reductions.
This has become the forgotten program. After garnering at least as much attention as Medicare reform last year, Medicaid reform is now rarely mentioned by federal lawmakers as a top priority.
One reason is that growth in the program, which had been nearly 10% a year, slowed to about 3% last year and is projected by the Urban Institute to remain below 7.5% through 2002.
But that isn't likely to satisfy the nation's governors, who still want more flexibility in running their Medicaid programs. The governors also argue that while 7.5% growth in Medicaid spending is lower than expected, it is still much higher than the growth in most states' revenues. Proponents of Medicaid reform also argue that without fundamental changes in the program, states are only a recession away from a return to double-digit increases in Medicaid spending.
The Clinton administration is considering reintroducing its plan to limit Medicaid spending on a per-capita basis while at the same time reducing Medicaid disproportionate-share payments to hospitals for treating large numbers of poor people. Last year, provider and consumer groups supported the White House's per-capita plan as a less painful alternative to the GOP proposal, which would have ended the federal entitlement to Medicaid and turned control over to the states.
Now those same groups are telling the White House to leave the Medicaid program alone. Republicans say they can support a per-capita cap but only with increased flexibility for states to allow them to try new managed-care options. It's shaping up as another case of strange political bedfellows.
Prognosis: Lawmakers are good at ignoring a wheel until it becomes unbearably squeaky. Medicaid isn't the priority it was when it was experiencing double-digit growth rates, so it's likely lawmakers will see no reason to re-enter a bloody political fight.
Access to care
Clinton and congressional Republicans alike are signaling that they want to expand health insurance coverage to some people who are uninsured today. Many leaders consider proposals to cover more children or unemployed workers as the next logical, incremental step toward healthcare reform after banning pre-existing medical condition clauses last year. But the drive to balance the federal budget may thwart such proposals because of their cost.
To cover an estimated 10 million children who now are uninsured, two basic ideas have emerged: Either increase enrollment in Medicaid or offer tax credits to families that buy insurance policies for children.
Surprising twists. So far, the political parties do not appear to be reaching consensus, and the positions they are staking out are surprising.
For instance, defeated GOP presidential nominee Bob Dole, who was known as a deficit hawk during his years in the U.S. Senate, suggested at one of his debates with Clinton last fall that Medicaid could be expanded to cover more children.
Meanwhile, liberal-leaning Daschle and House Minority Leader Richard Gephardt (D-Mo.) have been the surprising advocates of tax credits to parents who buy insurance policies to cover children.
Provider lobbyists say Republican leaders, notably Lott, probably will seek to offer a children's health insurance initiative in an effort to avoid being put on the defensive over the issue. They said congressional Republicans have asked providers to hold off on endorsing any children's health initiative until the GOP can release its own proposal.
Liberal groups, meanwhile, are said to be pressuring Daschle and Gephardt to withdraw their support for the centrist tax-credit idea.
Clinton, meanwhile, has tried to make coverage for the families of temporarily unemployed workers the next step in expanding health insurance coverage. He proposed a premium subsidy for up to six months to temporarily unemployed workers in his budget plan for federal fiscal 1997 and touted it in his re-election campaign.
White House officials estimated it would cover 3 million people a year and cost $2 billion a year. The cost would be offset by savings elsewhere in the budget.
But Republicans have not been publicly supporting such a proposal, making enactment unlikely.
Prognosis: Congress likely will pass and Clinton likely will sign legislation that aims to increase enrollment of children in state Medicaid programs. Also possible are incentives to states to increase enrollment among the 3 million children who already are eligible for Medicaid.
Coverage of unemployed workers will be included in Clinton's fiscal 1998 budget, but it's not likely to be passed.
Congress will keep managed-care lobbyists busy trying to defeat legislation aimed at regulating what benefits health plans provide and how they manage their networks.
But look for that legislation to be slowed by more assertive self-policing efforts by HMOs and a presidential commission that will probe healthcare quality issues.
Advocacy groups seeking increased regulation of managed-care practices have been buoyed by the success of legislation guaranteeing mothers and newborns hospital stays of 48 hours after vaginal births and 96 hours after Caesarean births, as well as requiring that insurance policies' lifetime mental health benefit payments be no lower than physical health benefits.
Those groups are expected to launch a new drive to ban so-called "gag clauses" in physician contracts with HMOs, which doctors say restrict what they can tell patients about their treatment options.
In addition, they may seek legislation to require that health plans pay for emergency room services whenever a "prudent layperson" would believe their symptoms merit emergency care.
Following the lead of the maternity-stay and mental health parity legislation, other bills might mandate that certain procedures or benefits be covered by health plans, such as requiring that mastectomy patients be allowed a hospital stay or specifying the length of stay after heart bypass surgery.
But after being on the defensive for much of the past year on quality issues, expect the HMO industry, led by the American Association of Health Plans, to try to thwart such legislation before it gains momentum in Congress.
Meanwhile, the president's healthcare quality commission, may take a longer look at managed-care practices.
That could encourage lawmakers to delay bills mandating certain benefits or banning certain practices until the commission releases its findings.
Prognosis: Anti-managed-care legislation will continue to be hot and hotly debated. The most likely measure to pass would be a watered-down version of the anti-gag-clause bill but only if a proposal acceptable to insurers can be drafted.