President Bush tried to illustrate how his vision to "modernize and strengthen Medicare" would benefit the program's 39 million beneficiaries last week, but it wasn't clear how his vague reforms would change life for hospitals and other providers.
During a White House ceremony on July 12, Bush unveiled a market-driven discount drug program for senior citizens and offered eight principles for reforming what he described as an outdated Medicare program. Hospital officials expressed disappointment with the lack of detail in Bush's plan.
Some details that they did see they didn't like, such as a proposal to alter the Medicare hospital trust fund.
Hospital groups said they were wary that the president's Medicare changes might include forcing more competition among healthcare providers, as was alluded to in versions of the plan that had been leaked earlier to the media.
While Bush's 17-page Framework to Strengthen Medicare pushes for competitive bidding for clinical laboratory services, durable medical equipment, and prosthetics and orthotics, hospital and physician services are off the hook for now, a White House official said.
"We talked also about the importance of moving Medicare in the direction of encouraging better performance through payment, but that would be a separate set of proposals," the Bush aide said.
Bush's proposal also asks Medicare to make claims-processing contract awards more competitive.
The centerpiece of Bush's announcement was a prescription-drug discount program expected to save Medicare beneficiaries 15% to 25% on drug costs. The program, using the bulk-buying muscle of pharmacy benefit management companies, will be offered to Medicare beneficiaries by year-end, HHS Secretary Tommy Thompson said. He said the program can be put in place without Congress' approval and without significant government expense.
Bush was careful not to cast the discount drug program, in which beneficiaries will get cards to present at their local pharmacies, as a complete fix for seniors' struggle with pharmaceutical costs.
"It is a first step, but is not a substitute for a drug benefit and for strengthening Medicare," said Bush, whose reforms call for a subsidized prescription drug benefit for Medicare.
Democrats were critical of Bush's discount drug proposal. House Minority Leader Richard Gephardt (D-Mo.) called the drug cards "the ultimate in illusion: trying to create the impression that they are really doing something for people with this problem."
Bush would like to combine Medicare Parts A and B, arguing that the separate funding structure for hospital and physician services doesn't make sense, especially when the Medicare hospital trust fund has a surplus while Part B runs a shortfall.
"We do not support utilizing Part A Trust Fund dollars for anything other than Part A services," said Thomas Nickels, senior vice president of the American Hospital Association. Nickels said Congress has a history of cutting Medicare reimbursement to hospitals when the trust fund surplus shrinks because it wants to preserve the fund.
Hospital groups have fought Republicans during this year's budgeting process over how the Medicare trust fund should be used. Republicans have suggested that the trust fund can be used to pay for prescription drugs or other senior health services.
Last week, Mitchell Daniels, Bush's top budget adviser, reportedly said money from the trust fund might be needed to pay for Medicare services besides those in Part A, such as physician services, next year. There is growing expectation that the federal budget surplus will be smaller than the $5.6 trillion over 10 years, as reported in January, when the next projection comes out in August.
While one of Bush's Medicare reform principles calls for "strengthening the program's long-term financial security," the president did not address how much the proposed changes would cost or where the money would come from.