President Clinton will likely propose giving HCFA more authority to solicit competitive bids for Medicare business or to contract directly with select providers, administration officials said last week.
The Medicare reform proposals, discussed but not acted on by the National Bipartisan Commission on the Future of Medicare, aim to give HCFA the same cost-saving management tools that private-sector purchasers have.
Clinton's plan would likely generate strong industry opposition because it could give HCFA the power to cut some providers from the Medicare market. According to HCFA, Medicare represented about one-third of the $371 billion spent on hospital care in 1997, so Medicare's ability to give business to only specified hospitals or networks would have serious repercussions for excluded providers.
The administration also is likely to reiterate its support for including outpatient prescription drugs in the Medicare benefit package and using 15% of the federal budget surplus-$700 billion over 15 years-to add 12 years to the life of the Medicare Hospital Insurance Trust Fund, now expected to be exhausted in 2015.
Clinton outlined the plans for prescription drugs and using the surplus to finance Medicare in his State of the Union address in January.
The unveiling of his latest initiative is probably weeks away, officials said.
But administration officials would not say whether reform legislation will incorporate a variation on a proposal to make Medicare less a payer of healthcare bills and more a program that helps seniors purchase private healthcare coverage.
That "premium support" proposal was debated by the bipartisan Medicare commission, which disbanded last month after failing to reach consensus on the proposal. The proposal was drafted by the commission's chairman, Sen. John Breaux (D-La.).
Administration officials said Clinton will not support Breaux's plan but will use it as a guidepost for any related proposal he might make.
They said expanding HCFA's ability to use private-sector techniques to manage Medicare costs is consistent with past administration statements.
"To make the traditional program more efficient, we believe that Medicare should be allowed to use the same effective practices that private health insurers use to constrain costs," HHS Secretary Donna Shalala told the Senate Budget Committee last week.
Specifically, she cited selective contracting with lower-cost providers and competitive bidding for such services as medical supplies.
Other administration officials expressed support for management improvements debated by the Medicare commission, including the creation of Medicare preferred provider networks, global payments to providers to manage beneficiaries' diseases or cases of acute illness, competitive bidding, selective contracting and negotiated pricing (See chart, p. 3).
Noting that the March 30 report of the Medicare Hospital Insurance Trust Fund trustees projected a 16-year life span for the trust fund, Sen. Edward Kennedy (D-Mass.) said the program needs "adjustment and changes. . .not the wholesale emasculation of the Medicare program as the Breaux commission is proposing." He added, "Clearly, the president is much more targeted toward recognizing the strengths of the program."
But Senate Budget Committee Chairman Pete Domenici (R-N.M.) urged Clinton to support Breaux's plan because it was the "only bipartisan Medicare reform plan on the table."
Some provider groups question whether the administration will ever release a Medicare reform plan, because Democrats, who want to retain the White House and win back Congress in the 2000 election, have been able to use Medicare effectively as a campaign issue.
"I don't know that there will be a plan," said Richard Pollack, executive vice president and director of government and public affairs for the American Hospital Association. "There seems to be division among Democrats as to whether to put out a plan that needs to be defended vs. a (Republican) plan that can be opposed."
The administration's comments on Medicare reform came a week before the Senate Finance Committee is set to begin five weeks of hearings examining all parts of the Medicare program. Committee members last week held an educational session to frame the issues that will be debated in those hearings.