The summertime thrust and parry between President Clinton and congressional Republicans over Medicare and tax cuts is being seen in the Beltway as a warm-up for an autumn duel over how to spend the federal budget surplus.
The contest could end in a draw-a grand compromise in which each side surrenders a little to achieve most of its goals. Or it could end as a political test of wills with the potential to repeat the government shutdowns of 1995 and 1996.
Caught in between is the issue of whether to increase Medicare payments that were trimmed under the Balanced Budget Act of 1997 or to continue some of the budget act payment policies after 2002 to help pay for a prescription drug benefit.
Also at issue are decisions about whether to restructure Medicare to encourage higher enrollment in private-sector health plans and whether the government-run fee-for-service plan should compete with those private plans.
"We're either going to have a big political deal or a big train wreck," said Richard Pollack, executive vice president and director of government and public affairs at the American Hospital Association.
If Congress and the White House can't reach a compromise on tax cuts and spending-regardless of whether those issues are incorporated into a single bill or are separate measures-the increases in Medicare payments could be lost.
But it's those provider reimbursement increases that have the broadest political support. Indeed, even Clinton proposed about $7.5 billion in relief over 10 years, as well as a phase-in of a prospective payment system for hospital outpatient departments and a delay in expanding a policy that cuts payments to hospitals for discharging patients to post-acute-care settings.
"The only thing that's going to pass is (legislation in) the areas where we have agreement, and the areas where there is agreement are the provider reimbursement fixes," said healthcare lobbyist Gwen Gampel, a former Democratic Capitol Hill aide.
Without a broad budget bill, it's unclear how Congress and Clinton could pass those payment increases. The increases could be attached to legislation setting annual spending for the federal government.
Another unanswered question is whether Clinton and Congress would offset the prescription drug benefit and increases in some nonhospital provider fees with savings elsewhere in Medicare.
If savings are sought, hospital payments are a likely target because they account for the biggest chunk of Medicare spending, at 40%.
At the same time that Clinton proposed the provider give-backs, he also proposed extending some balanced-budget law payment policies-for instance, the mandate to update hospital fees at 1.1 percentage point below the hospital inflation index from 2003 through 2009.
Clinton's biggest political weapon is his proposal to wrap outpatient prescription drugs into the Medicare benefit package, the centerpiece of his Medicare reform plan released in June (July 5, p. 2). The Congressional Budget Office pegs that benefit's cost at $168.2 billion over 10 years.
The GOP's big weapon is a tax cut, valued at $792 billion over 10 years.
Vice President Al Gore brandished the White House weapon at an appearance last week with congressional Democrats. "The alternative we are recommending is to . . . use portions of the surplus to extend the Medicare program and to add the long-needed prescription drug benefit, which senior citizens will quickly tell you is the single greatest need they have as they try to balance their own household budgets," Gore said.
To inoculate themselves against charges that they are spending money that could be used for a drug benefit, the House Republicans included a measure in the tax plan that would give seniors a tax deduction for buying insurance coverage to cover prescription drugs.
That provision would be contingent on passage of comprehensive Medicare legislation to subsidize prescription drug coverage for beneficiaries with incomes of less than 135% of the poverty level. It also would require Medicare supplemental policies to cover prescription drugs and require the government-run fee-for-service program to compete with private-sector plans.
Trying to hold the middle ground last week was Sen. John Breaux (D-La.). The chairman of the now-defunct National Bipartisan Commission on the Future of Medicare, Breaux said congressional leaders should not send any tax legislation to Clinton until Congress can pass Medicare reforms.