The federal government stood on the brink of major Medicare reforms last week and then backed away. As a result, providers will reap some benefits in the short term, but the future of the program is uncertain.
After a year of debate, the National Bipartisan Commission on the Future of Medicare dissolved last week after members could not reach consensus on an ambitious proposal to change Medicare from a bill payer to a program that pays most, but not all, of beneficiaries' premiums for private health insurance plans.
At the same time, budget committees in the House and Senate formally rejected President Clinton's proposal to extend the life of the Medicare Hospital Insurance Trust Fund through 2020 by diverting $700 billion of the federal budget surplus to the trust fund.
According to an estimate released last week by the Congressional Budget Office, the Hospital Insurance Trust Fund now is not expected to be depleted until after 2010.
But in taking those separate actions, the Medicare commission and the budget committees also rejected proposals for another round of Medicare provider payment cuts above the policies enacted under the Balanced Budget Act of 1997.
In passing their budget blueprints for federal fiscal 2000, the budget committees rejected President Clinton's proposal to reduce projected Medicare provider payments by $9 billion over five years. About $6.4 billion of those savings were hospital payment reductions, including a freeze on inpatient payments in fiscal 2000.
Meanwhile, when the Medicare commission failed to pass the final "premium support" proposal authored by its chairman, Sen. John Breaux (D-La.), it discarded a projected $39 billion in savings over 10 years from modernizing the fee-for-service program.
Proposals to trim provider payments could have been part of those fee-for-service modernizations, although commission officials said that would have been a last resort.
In his final proposal, released last week, Breaux had eliminated a measure from an earlier draft that would have squeezed $57.1 billion from Medicare fee-for-service provider payments by extending Balanced Budget Act provisions by another five years.
That's a good sign for providers, who said they are still reeling under the impacts of the 1997 budget act. But they warned that changes are still imminent-particularly since Breaux and Rep. William Thomas (R-Calif.), the commission's administrative chairman, have pledged to introduce the commission proposal as legislation.
In response to the two Medicare decisions last week, Richard Pollack, the American Hospital Association's executive vice president and director of government and public affairs, said, "We're delighted they took those two actions. But this is the top of the first inning."
"Conceptually, while I'd like to see (Breaux's proposal) happen, I'd rather see it happen in 2001 than 1999," said Thomas Scully, president and CEO of the Federation of American Health Systems.
The commission's work ended as it began, with steep philosophical divides and much political posturing.
In support of his plan, Breaux cited the findings of the General Accounting Office, which warned that Clinton's plan to use the surplus to beef up Medicare could undercut the incentive to reform Medicare. "We can't ignore the need to fundamentally reform Medicare, and we need to do it sooner rather than later," Breaux said.
While Breaux promised to take his proposal to the Senate Finance Committee, which he expects will pass it, others in Congress pledged to fight it.
"The commission majority's proposal would destroy Medicare as we know it," Rep. Fortney "Pete" Stark (D-Calif.) said in a written statement. "It is a plan designed by the managed-care industry and the drug industry. It is an economic fantasy."
"I opposed the plan because it is a dangerous gamble that would put the health and lives of 39 million seniors at risk, particularly those in rural states," said Sen. John D. Rockefeller (D-W.Va.), who sat on the commission and sits on the Senate Finance Committee with Breaux.
But some commissioners criticized Clinton for taking a less active role in the group's work.
"The presidency is a terrible thing to waste," Sen. Phil Gramm (R-Texas) said. "He had the opportunity to change Medicare and Medicaid, and he didn't do it."
Likewise, the budget committees saw their share of partisan posturing, with Democrats foreshadowing a possible repeat of the 1995 budget battle.
"I don't see a single dollar for Medicare," objected Sen. Frank Lautenberg (D-N.J.), the Senate committee's senior Democrat. "Instead, it diverts funds needed for Medicare into tax cuts, which probably will go disproportionately to the wealthy. . . . This budget resolution, in other words, is a recipe for gridlock."
Chairman Pete Domenici (R-N.M.) shot back by saying Clinton had designed his surplus-for-Medicare proposal "to deny the American people tax cuts."
Republicans also pointed to their proposal for a $132 billion reserve fund, derived from the surplus, which they said could be used to pay for the recommendations by the Medicare commission.