To most Americans, "baselines" are something that basketball and baseball players worry about.
But in Washington, baselines are the solemn concern of government bean-counters and politicians, who use these accounting devices to determine the rules of the budget-writing game.
And for healthcare providers, baselines ultimately can mean the difference between a profit or a loss on Medicare and Medicaid.
Each year as the White House and Congress set about crafting a budget for the federal government, officials sit down with estimates of current and future spending. These projections are called baselines. In Medicare, for example, they forecast what spending would be, given expected inflation and the number of beneficiaries, among other factors.
Thus, the baseline is the place where the spending game starts. If Congress budgets below that line, somebody gets shorted; above the line and he or she gets a bonus.
The referee in this game is the Congressional Budget Office, which determines the baseline for all federal programs. The latest CBO baseline, published earlier this month, adjusts the forecast of how much Medicare will spend under current law for hospitals, physicians, HMOs and other providers (See chart). And the results spell both good and bad news for providers as Congress and President Clinton negotiate legislation to balance the federal budget and rescue the ailing Medicare Hospital Insurance Trust Fund (See related story, p. 34). The CBO projects that the fund will be depleted by 2001.
The office now estimates that Medicare will spend $482.6 billion on fee-for-service hospital care between fiscal 1998 and 2002, the period when Congress and Clinton want to bring the budget into balance. That figure is $40.4 billion less over five years than the CBO's baseline of April 1996, the last time it projected Medicare spending.
The most recent CBO estimate for fee-for-service physician spending is $169.5 billion over the same five years, $47.3 billion less than the office estimated in April 1996.
Those lower spending growth rates may make it easier for Congress and Clinton to achieve Medicare savings goals without slashing payments.
"It makes the job ahead of Congress easier," said Robert Reischauer, former CBO director and a senior fellow in economic studies at the Washington-based Brookings Institution.
But Reischauer added that because spending growth is assumed to be lower under the new baseline, any change in Medicare payment policies will result in less money being saved. That may be good for providers, but it makes it harder to balance the overall budget.
Despite the adjustment in growth-rate estimates, the Medicare hospital fund still will be insolvent in 2001. The only difference between the April 1996 baseline and the most recent one is that the trust fund deficit at the end of 2001 now is estimated to be only $4.5 billion, as opposed to $28.9 billion.
The political ramifications of all this are not lost on provider groups.
"The president and Congress both win in baseline politics," said Frederick Graefe, a health lawyer with Baker & Hostetler in Washington. "They have a lot less heavy lifting to do."
Janice Pieper, senior vice president of government relations at the Medical Group Management Association, said the new estimates show that providers have been doing their part and that Congress needs to revisit the proposals of the last Congress that spread savings more evenly between providers and beneficiaries.
The budget plan passed by Congress in 1995 and vetoed by Clinton would have increased beneficiary copayments and indexed premiums based on income. During the 1996 elections, Democratic candidates blasted GOP candidates for raising beneficiary costs. Because of that, observers say, it is unlikely that such proposals will resurface during this year's budget debate.
But while Medicare provider spending projections are down in total, the rate of decline varies greatly between classes of providers.
Physician groups in particular, which saw a nearly 22% decrease in spending projections between April 1996 and January 1997 (See chart), are looking at the new estimates as ammunition to fight budget cuts.
"The good news is we can tell (Congress) with a straight face and a great deal of credibility that there is no room for reductions on the physician side," said Robert Doherty, vice president for governmental affairs and public policy for the American Society of Internal Medicine.
Medicare spending on hospital services, however, dropped only 7.7% from the April 1996 to January 1997 estimates.
The fact that Medicare physician spending is slowing at a faster rate than hospital spending, combined with data showing strong hospital profit margins, has hospital groups worried. They fear they will be targeted for even higher spending reductions.
One hospital lobbyist, who asked not to be identified, put it this way: "Both the margin numbers and the CBO baselines mask the fact that a lot of hospitals aren't doing very well, but that is a harder argument to make than the physicians have. They can point to the baseline and say, `We already gave."'