Paying medicare back for patients' hospital defaults. Cut social security checks to cover unpaid bills?

A controversy is quietly simmering here. Should the federal government continue to reimburse hospitals for bad debts incurred by some medicare patients? And, if so, should Uncle Sam then withhold money from these patients' social security payments to get the amount back? On one side is the inspector general of the Department of Health and Human Services, Richard Kusserow. On the other side are advocates for the elderly, led by Sen. John Heinz (R) of Pennsylvania, the outgoing chairman of the Senate Aging Committee.

In a report released last week, the inspector general estimates that medicare patients cannot or, for some reason, do not pay $240 million a year in charges for hospital stays. The largest part of this sum, other sources say, is for the first day's stay in a hospital, which medicare patients are required to pay in full. That cost averages about $500.

Mr. Kusserow says the federal government should either stop reimbursing hospitals for this loss or ask Congress to change the law and permit the government to recoup the charges from the social security checks of people who default on such payments.

Senator Heinz calls the reimbursement proposal ``not acceptable.'' Congress is not likely to adopt the Kusserow idea of permitting government to recover some medicare costs by withholding patients' social security benefits.

The senator says it is important to find out why some medicare patients do not pay their full hospital bills. ``There seems to be no recognition of why these people have not paid their debts,'' says one specialist on problems of the elderly who agrees with Heinz. ``It might be that they literally cannot do it.''

The average social security check for a single person, Heinz notes, is a little more than $500 a month. For the majority of recipients, the check is virtually the sole income and must pay for food, housing, clothing, and health care. If the federal government were to deduct funds from the checks, those who agree with Heinz say, it would in effect decide for those elderly Americans that health-care costs take precedence over food and shelter.

Kusserow says if such deductions were made, they would save the government some $140 million a year.

But Heinz says that is a drop in the bucket in the medicare program, which he says annually costs some $75 billion.

In any case, it is broadly agreed that someone should reimburse hospitals, or at least the many smaller hospitals now in financial difficulty.

This year Sen. Max Baucus (D) of Montana and others have been pointing out that many rural hospitals, in particular, are teetering on the brink of insolvency. To survive they may need slightly higher rates for some medicare procedures, not to mention reimbursement from some source of every legitimate medicare cost.

Senator Baucus and other lawmakers from largely rural areas say that for many rural residents, medical facilities are few and far between, and that it is important that rural hospitals not be forced to close.

Many hospitals and physicians treat people who cannot pay, then recoup financially by spreading the costs to paying patients. This procedure provides a kind of informal, private subsidy of low-income patients.

In order to prevent hospitals from having to take such action to recoup defaulted payments from medicare recipients, the medicare program adopted a policy of reimbursing hospitals directly for these debts. If medicare were to end these reimbursements, hospitals, especially those skating on thin fiscal ice, might decide to spread around these uncollected debts as well.