Medicare payments to managed-care plans take the biggest hit under the Clinton administration's fiscal 1998 budget plan released last week, while physicians are the biggest winners.
The White House proposal, which received mixed reaction on Capitol Hill, would reduce projected Medicare payments to hospitals by about $33 billion over the next five years. Clinton administration officials would not detail how the cuts would be achieved.
Physicians suffered the least pain: only $7 billion in spending reductions over the five-year period.
HHS Secretary Donna Shalala said that recent estimates by the Congressional Budget Office showing the physician portion of Medicare spending has slowed dramatically led the administration to conclude that physicians could not absorb significant further cuts.
Medicare payments to managed-care plans would be reduced by $34 billion over the same period, the largest hit by far as a percentage of total Medicare spending.
Currently, Medicare pays managed-care plans a rate estimated to be 95% of what Medicare would pay an average fee-for-service beneficiary. The new budget proposal would reduce that rate to 90%, which would save $6 billion over five years, HHS estimates.
Other managed-care savings would come as a byproduct of a general slowdown in Medicare spending envisioned under the plan.
Julie Goon, vice president of government affairs at the American Association of Health Plans, said the managed-care cuts would have a "disproportionate impact on beneficiaries who choose" an HMO.
But the HMO reductions were applauded by one Democrat influential on healthcare issues.
"Medicare finally will begin paying managed-care plans what they're worth," said Rep. Fortney "Pete" Stark (D-Calif.), senior Democrat on the House Ways and Means health subcommittee.
Beneficiary costs would increase $10 billion because Clinton's plan would freeze Part A copayments at 25%. Under current law, their share is scheduled to drop to less than 20% by the turn of the century.
The budget also includes several provisions sought by hospitals, including the much-sought language that allows provider-sponsored organizations to directly contract with Medicare.
In addition, about $11 billion in graduate medical education and disproportionate-share payments would be carved out of budgeted reimbursements to managed-care plans and redirected to academic health centers.
In total, the plan would reduce projected Medicare spending by $100 billion from fiscal 1998 through 2002.
The Congressional Budget Office estimates that absent any legislative action, Medicare spending will increase from $230 billion in 1998 to more than $317 billion in 2002 (See related story, p. 30).
Hospital group spokesmen said they were pleased by the PSO language but were still concerned about the distribution of the spending reductions.
"We would like to see a little more shared responsibility, no question about that," said Richard Pollack, the American Hospital Association's executive vice president for federal affairs.
Physician lobbyists said they were pleased Clinton recognized that the Medicare fee schedule has clamped down on physician spending growth.
"Spending on physician services has not been the problem with the Medicare program," Daniel Johnson, M.D., president of the American Medical Association, said in a statement.
But different specialties will take various hits because the president's plan probably will include a single Medicare physician payment base instead of the existing three, said Wayne Powell, assistant director for federal reimbursement policy for the American Academy of Ophthalmology.