President Clinton once again is asking providers to help pay for a Medicare prescription drug benefit as he makes a last-ditch effort to leave an imprint on the nation's healthcare system.
But lobbyists are shrugging off his proposal to trim Medicare hospital payments by $7.2 billion over the next five years, saying the White House is simply posturing about the prescription drug benefit and its funding.
"I think there's a lot of dancing going on," said Herb Kuhn, vice president of advocacy for Premier hospital alliance and formerly with the American Hospital Association.
The partners are just now filling out their dance cards. The White House last week released a budget proposal for federal fiscal 2001 that would reduce projected Medicare payments to providers by $19 billion over five years. The AHA is some $44 billion away from that figure. It wants $25 billion in additional Medicare payments to providers for the same period (See chart).
Clinton would use the $19 billion in savings to offset the costs of adding outpatient prescription drugs to the Medicare benefit package.
The administration estimates that the prescription drug benefit would cost $28.8 billion over five years. The balance of the cost would be underwritten by a transfer of federal surplus revenue worth $400 billion over 10 years. The extra surplus would be used to extend the life of the Hospital Insurance Trust Fund through 2025.
The proposal triggered opposition from hospital groups, which said the drug benefit should be funded entirely from the surplus.
"We urge the administration to reject the use of Medicare cuts to fund this program," Richard Davidson, president of the American Hospital Association, said in a written statement.
Last year Clinton proposed paying for the drug benefit by freezing hospital rates in fiscal 2000 (Feb. 1, 1999, p. 4).
But Congress ignored that call and passed legislation, which Clinton signed, that rolled back provisions of the Balanced Budget Act of 1997 by increasing Medicare and Medicaid payments to providers by $16 billion during the five years starting in 2000 (Dec. 6, p. 2).
White House healthcare adviser Christopher Jennings told reporters participating in a conference call that hospitals should be happy with the 2001 budget proposal because it does not include the hospital rate freeze of last year and would extend the life of the Medicare Part A trust fund.
"That's absurd," responded Thomas Scully, president and chief executive officer of the Federation of American Health Systems. "Chris is an old friend, but he has to live in the real world."
Jennings also cited a fiscal reason for the cuts. The Balanced Budget Act of 1997 will keep hospital inpatient payment updates at 1.1 percentage points below a hospital inflation index called the marketbasket until 2002. That could lead to a spike in Medicare spending afterward.
"We really do need to moderate the program in the future years," Jennings said.
Scully added that the yearly budget-drafting routine may have played a role in the cuts. "They have to start the process out by making (the drug benefit) look like it's financed," he said.
Other hospital lobbyists said the provider cuts were included as a bargaining chip that Clinton could use as the administration and Congress negotiate the drug benefit.
"He can toss overboard the Medicare cuts," Kuhn said.
Among the points of conflict: The GOP-controlled Congress is resisting Clinton's plan to provide the drug benefit through the fee-for-service program.
Some Republicans and moderate Democrats are calling for Medicare to subsidize seniors' purchases of private-sector insurance plans that cover prescription drugs. Others call for a program that would give block grants to state programs that would cover drugs for low-income seniors (See story, p. 6).
By presenting Congress with a budget that funds the prescription drug benefit primarily through provider payment reductions, Clinton also could put Congress in a budgetary box.
Congressional Republicans took power five years ago on a platform of fiscal discipline. Yet the GOP leadership senses the popularity of a Medicare prescription drug benefit and is searching for ways to enact one.
If it ignores the White House budget plan while approving a prescription drug benefit, Congress risks looking like a bigger spender than Clinton.
That would be particularly true if Congress also heeded providers' call for a new round of relief from the balanced-budget law (Feb. 7, p. 2).
Congress must develop its own budget resolution by April 15. It will set spending targets for fiscal 2001 but will not dictate the policies to achieve those targets. The resolution is not binding on Congress and Clinton does not need to sign it.
Specifically, Clinton's budget would:
* Trim 0.8 percentage points from the marketbasket for urban hospitals and 0.4 percentage points for rural hospitals when updating Medicare inpatient payments from 2003 through 2005. The cuts would save $4.3 billion over the three years.
* Reduce hospitals' reimbursement for Medicare beneficiaries' unpaid bills from 55% to 45%, worth $2.3 billion over five years.
* Reduce Medicare payments to hospitals for their capital costs by 2.1%, worth $630 million over five years.
* Apply private-sector contracting techniques, such as PPOs, disease management and centers of excellence, to Medicare, worth $3.2 billion over five years.