President Clinton is ending his watch at the helm of the huge federal healthcare budget much as he began it: seeking Medicare cuts to fund a huge expansion in healthcare entitlements.
His proposal last week to extend Medicare coverage to outpatient prescription drugs is his last chance to make his mark on healthcare policy and one of his last major policy initiatives.
But the proposal comes at a cost to providers. It would continue some provider payment growth restraints-largely affecting hospitals-enacted under the Balanced Budget Act of 1997. That would save $39 billion over 10 years to help pay the $118 billion price tag for the new benefit.
The plan is reminiscent of his disastrous first venture into healthcare policy, the Health Security Act of 1993. It proposed provider cuts of $124 billion over five years to pay for the legislation's impact on the federal budget deficit, estimated at $136 billion over nine years.
Healthcare as the bank. "Every time the federal government does anything to expand benefits, they treat us as the bank," said Thomas Scully, president and chief executive officer at the Federation of American Health Systems. "It's heavy-duty politics, and usually we pay when that happens."
This time, however, the scope of the plan is narrower, and few experts would dispute the necessity of the benefit. In fact, experts said Medicare falls far short of private-sector health insurance plans in coverage of prescription drugs. With pharmaceuticals playing an increasing role in healthcare, the absence of a universal prescription drug benefit is seen as a huge gap in the Medicare benefit package.
But Medicare politics may endanger fiscal prudence. It may be easy for Congress to pass the prescription drug benefit. But it may be hard to cast the votes supporting the provider payment cuts that Clinton has proposed to help finance the benefit.
Providers already are pushing Congress to roll back many of the payment policies enacted under the budget law, so the prospect of new payment-growth curbs will likely only accelerate provider groups' lobbying campaigns.
"We are deeply disappointed that the president continues the pattern of cutting payment to hospitals," American Hospital Association President Richard Davidson said in a written statement. "Instead of further reductions, we need to fix the unintended consequences of the Balanced Budget Act."
Driven by seniors' demands for a drug benefit and opposition to further payment savings, Congress could take the easy way out, one expert warned.
"I would hope that we would not end in an orgy at the end of the congressional session where we don't enact the provider cuts but do enact the prescription drug benefit," said Robert Reischauer, a former Congressional Budget Office director who is now a senior fellow at the Brookings Institution in Washington.
But if ever there was an opportunity for bipartisan agreement on long-term Medicare reform, Clinton's plan may be it.
Instead of proposing a road map to winning the 2000 presidential election for Vice President Al Gore and returning Democrats to a congressional majority, Clinton drafted a bipartisan document, many Republicans and outside observers said.
Indeed, while Gore did not attend last week's announcement ceremony, many of Clinton's Capitol Hill sparring partners-who have often accused Clinton of using Medicare as a political tool to bring down congressional Republicans-did attend and made some positive remarks afterward.
"The president wants to make an effort, in the last few months of his political career, to hang some policy pelts on his wall, as opposed to some political pelts," said Rep. William Thomas (R-Calif.), chairman of the House Ways and Means health subcommittee.
Along with Sen. John Breaux (D-La.), Thomas served as co-chairman of the National Bipartisan Commission on the Future of Medicare. The 17-member panel drafted a Medicare reform plan earlier this year but fell one vote short of the 11-vote majority needed to formally recommend the plan.
Many Republicans, along with Breaux, blamed Clinton for killing the plan because none of his four appointees would vote for it.
But Breaux, too, complimented Clinton's proposal.
"It's safer to do nothing than to do something," Breaux said. "He has taken a politically risky route. There are an awful lot of House Democrats who didn't want to do anything."
Just seven votes short of a majority, House Democrats believe they could win the 2000 election by using such issues as reform of Medicare and managed care-areas in which voters trust Democrats more.
But Clinton's desire to leave a healthcare legacy may have won out as he drafted the plan.
"They crafted this, not with the idea to make it dead on arrival or to hit Republicans in the head with it, but with the idea to make the life of the elderly better," said Uwe Reinhardt, a Princeton University healthcare economist. "I think Clinton genuinely wants this. This is not the kind of thing a liberal Democrat drafts. This is vintage Clinton: 'I'm going to put out something that Republicans can't reject out of hand, because it's something the majority of people view as reasonable,' " Reinhardt said.
In fact, the White House cast the proposal as reasonable because it finances the drug benefit partly from provider savings and from increases in beneficiary cost-sharing, not solely from the budget surplus.
Provider savings would be realized by:
* Subtracting 1 percentage point or more from the hospital inflation rate, called the "marketbasket," when calculating Medicare inpatient payment updates after 2002. There would be other provider savings, which administration officials declined to detail last week. They made clear, however, that they would not continue Balanced Budget Act cuts in home health, nursing homes and hospital outpatient and disproportionate-share payments.
* Implementing "modernization" initiatives, including using private-sector preferred provider organizations; increasing the use of selective contracting with hospitals that perform a high volume of complex, expensive medical procedures; and expanding the use of competitive bidding in the fee-for-service sector.
* Establishing a "competitive defined benefit" system for Medicare+Choice plans, which would bid competitively for Medicare business.
Combined, those proposals would save $72 billion over 10 years, although Clinton also proposed $7.5 billion in relief from budget law payment policies over 10 years.
Hospital groups warned that the modernization initiatives, particularly the establishment of Medicare PPO networks, could cut some hospitals out of the Medicare market.
"Giving government the ability to use the enormous economic power that Medicare has could disrupt healthcare in communities across the country, making the current market power of HMOs pale in comparison," Davidson said.
Thomas and Breaux also objected to the modernization initiatives.
Under the commission's plan, fee-for-service Medicare would have been forced to participate in the competitive pricing process.
"If you're going to compete, everybody needs to compete," Thomas said.
But Gene Sperling, Clinton's national economic adviser, said forcing the Medicare fee-for-service plan to bid competitively could make that option unaffordable for many seniors.
"Where the traditional plan was included, it was going to drive up the premium," Sperling said. "That meant many people would feel they had to go into managed care, not out of their choice or not because it was found more attractive, but because they felt financially they were being coerced."