President Clinton's plan to cut Medicare spending on hospital care actually would increase Medicare hospital payment rates by nearly 2%.
Under the Clinton administration's $1.7 trillion federal budget released last week, Medicare payment rates for hospital inpatient care would increase at the rate of hospital cost inflation minus one percentage point for fiscal 1998 through fiscal 2002.
The government's 1998 fiscal year starts Oct. 1, 1997.
The hospital "marketbasket" index, which tracks changes in prices hospitals pay for a common set of goods and services, is projected to rise 2.8% in fiscal 1998, according to the Prospective Payment Assessment Commission. Under Clinton's budget, that would mean a Medicare inpatient payment rate increase of 1.8%. Inpatient payment rates rose 2.3% under the fiscal 1997 budget.
Payments to non-prospective payment system hospitals would increase 1.3% under the plan.
PPS hospital capital payments would be reduced to 90%*of costs from 100%, saving $6 billion over five years.
By comparison, retail prices for hospital care rose 4.1% last year, according to the U.S. Labor Department. Wholesale hospital prices, meanwhile, inched up just 1.4%.
ProPAC recently recommended to Congress that the government freeze Medicare inpatient payment rates.
Overall, the administration said the budget would reduce projected Medicare spending by $100 billion over five years. But congressional Republicans said the White House was overstating its savings by as much as $15 billion over that period.
Projected hospital Medicare spending would be reduced $33 billion under the Clinton budget. That figure takes into account a $10 billion increase in payments to hospitals that treat a disproportionate share of elderly patients and to teaching hospitals for their graduate medical education costs. The additional GME payments come at the expense of managed-care plans that contract with Medicare.
The Congressional Budget Office projects that, absent any action by lawmakers, Medicare spending will rise to $317 billion in fiscal 2002 from $230 billion in fiscal 1998.
The White House budget also includes a per-beneficiary cap on Medicaid spending (See related story). The cap would increase at an annual rate about equal to the rate of increase in the gross domestic product, slightly more than 2% in 1995.
Under the proposal, the U.S. Department of Veterans Affairs would receive a 2.8% increase in its healthcare budget, to about $17.6 billion. However, the entire increase is dependent on retention of $468 million in third-party payments.
VA officials said they will be seeking legislation to retain those third-party payments, which now are largely returned to general government funds.
Such legislation would give VA facility managers incentive to compete with private providers for veterans who are not currently receiving care at VA facilities.
"It puts the right incentives out there to take better care of our veterans," said D. Mark Catlett, the VA's assistant secretary for management.
Clinton's budget also would increase federal funding of the Agency for Health Care Policy and Research, which develops clinical practice guidelines, by $6 million to a total of $149 million in fiscal 1998.
It would increase funding for HHS' inspector general's office, which investigates Medicare and Medicaid fraud, to $112 million in fiscal 1998 from $105 million this year.