White House and Republican negotiators reached a balanced-budget agreement late last week that would trim projected Medicare spending by $115 billion over five years, with $100 billion of that savings coming from budgeted payments to providers.
Projected Medicaid spending would be reduced by about $23 billion over the same period, fiscal 1998 through 2002, under the accord.
Representatives of provider groups had a mixed reaction to the budget.
"Our members want a balanced budget, and they are going to be very disappointed if there is not serious restructuring of the Medicare program," said Thomas Scully, president of the Federation of American Health Systems. "But the amount of dollars being taken out of hospitals is very high."
While the details of the agreement were not made public, those familiar with the talks said $43 billion to $48 billion of the $115 billion in savings would come from projected hospital Medicare reimbursements.
Despite a last-ditch lobbying effort led by the American Hospital Association, Medicare hospital payment rates would be frozen in fiscal 1998 under the deal (See story below).
For the duration of the agreement, spanning fiscal 1999 through 2002, hospital payments would increase by the rate of inflation in hospital costs less one percentage point, according to congressional staffers.
Budgeted Medicare payments to managed-care plans would be reduced by $34 billion to $38 billion, with the remainder of the savings coming from physicians, other providers and beneficiaries.
Although the framework for the agreement was reached last week, it represents little more than broad budgetary targets. By law, the actual policies designed to reach those savings targets must be passed by congressional committees later this year.
As rank-and-file members of both parties were briefed on the deal last week, there appeared to be enough support to pass it in both the House and the Senate.
A group of conservative Republicans led by Reps. Zach Wamp of Tennessee and W.J. "Billy" Tauzin of Louisiana predicted the plan would have strong support among House Republicans. Rep. Charles Stenholm of Texas, a member of the group of conservative Democrats called the "Blue Dogs," said 60 to 75 House Democrats also would support the plan.
House Democratic leaders and liberals, led by Minority Leader Richard Gephardt of Missouri, said they would not support the deal because it reduced Medicare spending too much and did not spend enough on health and education.
The $115 billion in savings represents a little more than 9% of the nearly $1.25 trillion budgeted for Medicare spending from fiscal 1998 through fiscal 2002.