Despite the first budget surplus in a generation, the compromise spending blueprint Congress passed last week could spell trouble for healthcare providers trying to nullify payment cuts enacted two years ago.
The Republican-drafted budget framework-a compromise of differing bills the House and Senate passed last month-calls for setting aside for Medicare and Social Security some $1.8 trillion in projected federal budget surpluses from payroll tax receipts expected over the next 10 years. Republican leaders call the mechanism for protecting those surplus funds a "lockbox."
Although the measure allows Medicare to draw money from the lockbox, it would be only to pay the costs of implementing a comprehensive Medicare reform package, such as the "premium support" plan proposed by Sen. John Breaux (D-La.) and Rep. William Thomas (R-Calif.), the co-chairmen of the National Bipartisan Commission on the Future of Medicare.
The document, however, said its authors don't want the surplus funds to be used for "incremental" reforms. That apparently comes in response to provider lobbying that seeks to restore payment cuts enacted under 1997's balanced-budget law.
That money also could be used to finance a prescription drug benefit, as both President Clinton and commission members have proposed.
The budget document does not say how much surplus money would be earmarked for Medicare restructuring. A House budget aide said its value will depend on the projected cost of the restructuring package.
The budget blueprint is a nonbinding document that sets taxing and spending targets to be met by legislation passed later this year. It doesn't need Clinton's signature.
Even though it doesn't have the force of law, it still could pose trouble for provider groups trying to reverse the payment cuts. In fact, it was Medicare spending assumptions in the budget resolution for fiscal 1998 that led directly to the freeze on Medicare inpatient payments in fiscal 1998, as well as other provider payment cuts and restraints imposed under the balanced-budget law.
Thomas Scully, president and chief executive officer of the Federation of American Health Systems, which represents for-profit hospitals, acknowledged that the budget resolution will give congressional committees with jurisdiction over Medicare an excuse not to restore provider payment reductions.
In passing the blueprint, Congress again rejected Clinton's call to dedicate $700 billion of the projected federal surplus-15% of the total over 15 years-to the Medicare Hospital Insurance Trust Fund.
Senate Budget Committee Chairman Pete Domenici (R-N.M.) described the Clinton proposal as "post-dated checks that are going to come due. Who's going to pay them? The American taxpayer," Domenici said.
Democrats countered that the Republican budget didn't do enough to secure the surplus.
"It fails to lock away the surplus to strengthen Social Security and Medicare," Clinton said in a written statement.
Congress also rejected $9 billion in Medicare provider payment cuts over five years that Clinton had included in his budget proposal, including a one-year freeze on inpatient rates in fiscal 2000.
Under the budget framework, Medicare is projected to spend $2.9 trillion over the next 10 years.
Meanwhile, a report released last week said the cost of a prescription drug benefit could add 7% to 13% to Medicare's costs during the next decade. Medicare is projected to spend $212.1 billion this year.
The report from the National Academy of Social Insurance said a prescription drug benefit that would pay for no more than $2,000 a year per beneficiary in prescription drug costs would initially be the most expensive option it analyzed, but would be the least costly over time.
Options that would begin paying for prescription drugs after a beneficiary had spent between $1,000 and $3,000 out of pocket would be less costly initially but more costly over time.