Reagan health-care budget: fragile balance of interests

President Reagan holds a fragile crystal in his hands in trying to limit US health care spending to a tenth of the federal budget. Deep social and political, as well as economic, tensions are reflected in the health cost issue.

Critics of the Reagan cuts in the health care budget are busy pointing out pockets of poor Americans whom they say will be hit hardest.

Cities and states worry they will have to pick up at least some health costs. Meanwhile, a new report by the Tax Foundation, Inc., shows that tax increases totaling $3 billion annualy already are pending in state legislatures this year.

There is wide agreement that health costs are a major inflation engine: The nation's outlays for medical care grew from 4.5 percent of the gross national product in 1955 to 9 percent in 1979, led by hospital costs that leapt at double the consumer price index rate.

The Reagan budget omits expansionary projects like national health insurance -- just as President Carter in his January budget dismissed it as not feasible for now.

Medicare spending for older Americans --the most costly program -- is nearly untouched by the cuts of the new administraton. The Reagan budget limits the medicaid program for the poor to a 5 percent rise next year and then to the rate of inflation thereafter. And it lumps together a host of other programs -- from rat control and alcoholism grants to veneral disease and family planning services -- into two blocks grants to the stateS, cutting outlays overall by 25 percent, and letting states decide to some degree how to allocate the surviving 75 percent of funding.

In outlays, the Reagan budget would trim $1.2 billion from Carter's fiscal 1982 budget, and $5.1 billion by fiscal 1984. Even so, 1982 health spending would climb from $73.4 billion next year to $90.3 billion in 1984 -- increasing health outlays from 10.5 percent in the overall budget to 11.7 percent in the three years.

Also, the Congressional Budget Office expects medicare and medicaid outlays will rise $1.6 billion higher than the Reagan estimates by 1984, as inflation raises food, fuel, and other health industry costs.

Omitting medicare from curbs to keep Mr. Reagan's pledge not to deprive "the truly needy" works against the long-range effort to contain federal health costs , says Robert Hartman, Brookings Institution economists.

"Medicare is as important as medicaid if you want to stop spiraling costs and excess utilization of health resources," Mr. Hartman says. "In the long run, the only way to curb government medical care costs is to require patients to pay a share. Cost-sharing has to be part of the system now. And medicare would be more amenable to cost-sharing than medicaid, which is a program for the poor."

The 25 percent cut in miscellaneous health programs and melding of them into two block grants "means the needy will be pitted against the needy," says Burt Seidman, director of social care programs for the AFLCIO.

The impact of nonhealth Reagan cuts could lead to further limits on health spending for the poor, Mr. Seidman says, as medicaid eligibility is often linked to enrollment in the food stamp and AFDC (Aid to Families with Dependent Children) programs.

Family planning agencies -- which this year got some $166 million in federal funds to help run about 3,000 centers in the country --complain they already were running short of money before the Reagan cuts. "Because of increasing costs, over 200,000 needy women and teen-agers will have to be turned away, even if there is no reduction in the budget in 1982," says Mimi Barker of the Planned Parenthood Federation of America.

"It makes little sense, when the country is so torn up about abortions, to cut a program that does so much to prevent them," Miss Barker says. The worry of health-related groups like the family planning agencies is that they will lose their national leverage under the block grant approach.

State and city spokesmen contend the greater flexibility they get in deciding how to spend the block grant funds may not be enough to make absorbing the 25 percent cut worth their while. They worry the cuts may come, but without lifting stat e obligations to pay for services.