President Clinton ignited a new money battle for providers last week as he proposed an activist healthcare agenda in his proposal to balance the federal budget in the next fiscal year.
Already skirmishing with congressional Republicans over patient protection legislation and Medicare expansions, Clinton prompted more GOP election-year saber-rattling with his $1.733 trillion fiscal 1999 spending plan. He proposed that providers and health plans pay $659.2 million in new user fees to fund expanded provider audits, certification surveys and a host of other HCFA activities.
Clinton's budget mostly leaves intact the payment policies set under balanced-budget legislation enacted last year. As a result, total Medicare provider spending for 1999 would be $224.8 billion, and Medicaid spending would total $107.7 billion.
Republicans have grumbled that Clinton is trying to foist much of his failed healthcare reform agenda on the nation in small steps. (See related story on budget politics, p. 57.)
They also objected to the use of recoveries from increased anti-fraud measures -- funded in part by the new user fees -- to pay for an expansion of Medicare to people under age 65. Clinton administration officials estimated the anti-fraud measures would save the Medicare program $2.4 billion over five years.
The biggest share of the proposed new user fees would be $395 million collected from hospitals and other Medicare Part A providers submitting year-end cost reports claiming the government owes them money.
In those cases, HCFA would charge providers a fee for their settlements, reviews or audits, which would in turn be used to finance an increased number of HCFA audits of providers aimed at detecting and deterring inflated or fraudulent cost reports.
HCFA said it audited the cost reports of 4,964 of the 37,995 providers subject to such audits in fiscal 1997, while reviewing 83 million of the 842 million claims processed by Medicare. Under the user-fee proposal, HCFA would double the number of claim reviews and audits in fiscal 1999, which begins Oct. 1.
A second user fee, worth $35.5 million to the federal government in 1999, targets provider overbilling by charging a fee for duplicate or unprocessible claims.
Government officials have not disclosed how those fees would be assessed.
HCFA Financial Management Director Elizabeth Cusick described the new user fees as "part of the cost of doing business with Medicare."
But GOP leaders were quick to decry them.
Clinton "has to increase taxes and fees," said Sen. Pete Domenici (R-N.M.), chairman of the Senate Budget Committee. "That used to be out around here. You didn't want to be called a tax-and-spend president."
Saying he spoke for 40 to 45 of the Senate GOP caucus' members, Sen. Phil Gramm (R-Texas) called for any gain for the federal government in user fees to be offset by an equivalent income-tax cut.
Provider groups also criticized the proposals.
"This is shifting an administrative cost from government to the provider," said Stephen Ubl, vice president for legislation for the Federation of American Health Systems, which represents for-profit hospitals. "It's money better spent on patient care."
"These are just another form of hidden (payment) cuts," said Carmela Coyle, senior vice president for advocacy and representation with the American Hospital Association. "This concept of user fees to finance fraud and abuse (investigations) and charging people if they make a mistake on a claim is not the right approach."
The proposal to expand audits of Part A providers' cost reports and charge them for billing errors came as part of a broader effort to crack down on Medicare fraud and abuse.
It also came as hospital executives, meeting in Washington, heard criticism of the federal government's ever-widening fraud dragnet (See story, p. 26).
Besides the increased cost-report audits, the HHS budget calls for:
Elimination of an outpatient prescription drug payment policy that allows physicians to bill Medicare more than the doctors paid for the drugs.
Expanding "centers of excellence" demonstrations -- under which Medicare negotiates a discounted package payment with high-volume, high-quality providers of specific procedures -- from heart bypasses and cataract surgery to include other heart surgery procedures and knee and hip replacement.
Requiring Medicare community mental health services to be delivered in a mental health center, rather than in a home or other residential setting where the quality of care cannot be verified.
An American Medical Association official who asked not to be identified noted that those proposals have been made before but were sold as spending reductions, not fraud control mechanisms.
" `Fraud and abuse' becomes a marketing term . . . for things that increase the hassle factor and nickel and dime physicians to death," the AMA official said.
The budget's focus on fraud and abuse coincides with a White House effort to extend Medicare coverage to people age 55 to 64 who do not have private health insurance coverage.
Previewed in January, that proposal was formally sent to Congress as part of the White House budget request. It would allow early retirees between age 62 and 64 to buy into Medicare by paying a full premium of about $300 a month and people age 55 to 64 who involuntarily lose their jobs to buy into Medicare by paying a premium of about $400 a month.
Although administration officials said the proposed expansion will be self-financing and will not drain the Medicare Hospital Insurance Trust Fund, they said they will have to rely on fraud recoveries to pay part of the costs. They said the premiums will not cover the $2 billion to $3 billion a year in program costs.
At a hearing of the Senate Budget Committee last week, Sen. Spencer Abraham (R-Mich.) questioned that financing scheme because savings from fraud and abuse measures would be used to expand coverage to new beneficiaries rather than preserving the program for current beneficiaries.
"I can't imagine my constituents sitting still for that," Abraham told Franklin Raines, director of the White House Office of Management and Budget. "It runs contrary to what I think our constituents would think would be a valid use of expenditures."
Covering all the items on his 1998 healthcare agenda, Clinton also included in the budget $30 million to put in place the recommendations of his Advisory Commission on Consumer Protection and Quality in the Health Care Industry.
About $25 million would be used to fund quality research by the Agency for Health Care Policy and Research that the commission is expected to recommend when it publishes its final report in March.
HHS Secretary Donna Shalala said there would be other budget "adjustments" related to bringing HCFA programs into compliance with legislation related to recommendations from the quality commission.
The AHCPR would receive $46 million in new revenues -- representing more than a quarter of its budget -- from a new "Research Fund for America" that Clinton proposed.
That fund is partly reliant on $3.6 billion from national legislation requiring tobacco companies to defray the costs of treating smoking-related illnesses. The proposed tobacco settlement has yet to begin moving through Congress (See story, p. 3).
The Department of Veterans Affairs' budget calls for a $40.3 million dip in its healthcare spending. Under Clinton's proposal, government funds would constitute slightly more than $17 billion, while the VA is projected to collect another $676.8 million from third-party insurers.
Veterans groups, who routinely draft an alternative budget plan, said the VA budget proposal would fall about $552.2 million short of what's needed to maintain current services.
"We think we're about a year away from hitting a brick wall," said Gordon Mansfield, executive director of Paralyzed Veterans of America.
Clinton's budget also proposes a $10.1 billion budget to cover 6 million military retirees, their dependents, and the dependents of active-duty military personnel.
That figure is $500 million more than the military services requested. Senior Pentagon officials said the extra money was derived from some $21 billion in savings over five years made available from other parts of the Defense Department budget through lower-than-expected inflation rates.