Though some healthcare lobbyists and members of Congress complained last week that President Bush's first budget blueprint was missing a lot of details, hospital groups were gleeful that it was missing one thing: reductions in budgeted Medicare payments.
For the first time for as long as many hospital lobbyists could remember, the fiscal 2002 budget proposal the White House sent to Congress sought no savings by capping annual Medicare payment increases to hospitals, physicians and other providers.
Bush's budget, however, did not propose repealing Medicare payment-growth caps already in place. As a result of a law enacted in December, for instance, Medicare hospital payments will increase at a 0.55 percentage point less than the hospital marketbasket, an inflation measure, in 2002 and 2003.
Hospital lobbyists said they scored a victory by not having to fight to reverse proposals to further limit or reduce their budgeted pay increases, as happened repeatedly under President Clinton. "This is the first time in a generation that we haven't seen Medicare payment cuts in a president's budget," said Richard Pollack, executive vice president of the American Hospital Association.
"From the hospital community's point of view, that's very encouraging," said Edward Goodman, vice president of public policy at the VHA alliance.
Total Medicare spending is projected to increase 4.6% under Bush's budget proposal to $226 billion in 2002 from $216 billion this year. No breakdown of spending was available in the budget document, however.
But there are some ominous signs on the horizon for Medicare financing.
The Bush plan would earmark nearly $842 billion of the $5.6 trillion cumulative federal budget surplus from 2002 to 2011 for a contingency reserve. The plan acknowledged that in accounting for the surplus dedicated for the contingency reserve, it is borrowing from the Medicare Hospital Insurance Trust Fund, which will run a cumulative 10-year surplus of more than $350 billion, according to the Congressional Budget Office. That means half of the contingency reserve, which could be used for virtually any other purpose, could be taken from the dedicated fund for hospitals.
The House has passed legislation that would bar Congress from borrowing from the Part A trust fund to pay for other programs, calling it a Medicare "lockbox" (Feb. 19, p. 44).
Bush's budget proposal also would put aside $153 billion for unspecified Medicare modernization and a new prescription-drug benefit from 2002 to 2011 (See related story, p. 12). That drug benefit, which Bush calls the "immediate helping hand," would send $48 billion in block grants during four years to states to initiate drug-purchasing assistance programs.
The drug proposal already is in trouble, however. Sen. John Breaux (D-La.), whom Bush has courted in his efforts to reform Medicare, last week said he opposed the helping hand measure. "I think the helping hand is an idea that has a good purpose, but it's a bad idea because it takes the pressure off for real reform," Breaux said.
In addition to ominous signs for Medicare, changes may be in the offing for Medicaid. Bush proposed unspecified changes to Medicaid and the State Children's Health Insurance Program to increase states' abilities to coordinate with employer-sponsored coverage or rely on private insurers. The White House also proposed changes to the way the federal government closes a Medicaid loophole that allows states to artificially increase the federal government's share of their state Medicaid budgets.
It was not clear how the proposal would affect states. The plan, however, projected cumulative savings of $17.4 billion from proposed Medicaid policy changes from 2002 to 2011.
Bush also proposed a 13.8% increase in the budget for the National Institutes of Health, up $2.8 billion to $23.1 billion. He proposed a new tax credit to help uninsured people without access to employer-sponsored plans to buy health insurance.
The plan also increases by $1 billion, to $23.4 billion, the Department of Veterans Affairs' budget for programs subject to annual appropriations, such as the healthcare system. No specific budget data were provided for the VA healthcare system.
In addition, the White House plan proposed $124 million in increased spending for community health centers next year to help grow the number of such centers to 4,200 from 3,000. The plan would double the number of patients served to 22 million from 11 million when the initiative is completed.