Congressional Budget Cutters Take Aim at Two Sacred Cows

CANCEL your dinner plans. Unplug the phone. Heat up a bag of popcorn. Even in a year when Congress is considering dozens of ambitious reforms, nothing will match the upcoming Medicare debate for raw political theater. Armed with flow charts, opinion polls, and podium-thumping speeches, Republicans will portray themselves as the party of good sense, bent on saving Medicare from insolvency. Democrats will accuse the GOP of gutting the $180-billion program to finance a tax break for the wealthy. The show could start tomorrow, when Republicans plan to unveil blueprints for slowing Medicare's growth by $270 billion, over the next seven years. Many observers say this goal cannot be met without significant cost increases or reductions in coverage. At stake is the support of the 37 million older and disabled Americans enrolled in Medicare, and the Republican promise to balance the federal budget. But also in question is government itself. Some wonder if Congress can, or should, be pushed to revolutionize, in a matter of weeks, a program that consumes 11 cents of every tax dollar. ''This debate will say a lot about the ability of our institutions to deal with huge programs where there are billions at stake, millions of people affected, and issues that are exceedingly complex,'' says Mark Peterson, a professor of political science at the University of Pittsburgh. ''These are the hardest things for government to do.'' House Republicans recognize the gravity of the task. Win, and they could become the party of reform for the next generation. Lose, and they could be drummed out of office faster than their Democratic predecessors. Today, House and Senate Republicans are expected to meet privately to hash out their differences and, as Senate majority leader Bob Dole put it, begin ''singing out of the same hymnal.'' By all accounts, Medicare costs are exploding. Since 1970, the rolls have swelled by 18 million, and Medicare's share of federal expenditures has nearly quadrupled. Part A of Medicare, which covers government payments to health-care providers, is funded by a 1.45 percent payroll tax, and is expected to run a deficit by 2002. Part B, which covers costs like doctor visits and laboratory tests, is funded by premiums paid by beneficiaries and general tax revenues. Its costs are also rising. While the GOP plan is still a work in progress, some details are emerging. Republicans have avoided raising copayments or deductibles for beneficiaries - with the possible exception of those earning more than $75,000 a year. Neither do they plan to force recipients into managed care networks, or HMOs, that would limit their choices of health-care outlets. The GOP plan would achieve $100 billion in savings by reducing the amount it pays to providers, like doctors and hospitals, to cover the costs of everything from inflation to new technology and the treatment of indigent patients. Also, if total federal spending on Medicare rose beyond a pre-set annual limit, providers would pay the balance. The plan may also call for saving $60 billion by freezing the percentage recipients pay in premiums at 31.5 percent, instead of letting it fall to 25 percent as it is scheduled to next year. Under a possible ''means testing'' measure, recipients with high incomes would pay slightly higher premiums. Yet Rep. James Greenwood (R) of Pennsylvania, a member of the House Medicare task force, has called means testing a ''last resort.'' The most revolutionary concept of the GOP plan, however, may be the establishment of so-called Medical Savings Accounts (MSAs). If recipients chose this option, they would receive an insurance policy with a $3,000 deductible to cover the cost of a ''catastrophic'' medical problem. They would also receive a tax-free spending account with a fixed annual limit that they could use for routine health care. Republicans say these accounts will save billions by rewarding consumers who bargain-hunt: If recipients did not use all their MSA money, they would receive the balance as a cash payment. This would increase competition in the health-care industry, they say, and would help control costs without government regulation. A study released Tuesday by the National Center for Policy Analysis estimated that MSAs could save $195 million in seven years. House Republican whip Tom Delay of Texas predicted MSAs could cover nearly all the savings in Medicare the GOP has promised. But Democrats charge that MSAs would only redistribute costs from those who do not need much health care to those who do. The study itself, they note, assumed that deductibles for those who choose not to accept MSAs would skyrocket from $100 to $750. ''[MSAs] are wonderful if you don't get sick,'' says California Rep. Henry Waxman, a Democrat. ''You're going to be giving a lot of money to people who don't really need it.'' Yet the Democrats have no serious counterproposal. President Clinton's plan, which would have cut $124 billion over seven years mainly by paying providers less, has been all but ignored in Congress. Instead, Democrats advocate looking for more savings by curbing waste and abuse, and limiting the ''excessive'' use of expensive medical technology. This week, Sen. Tom Harkin (D) of Iowa released a report by the General Accounting Office showing that in a random sample of bills for medical supplies submitted to Medicare by providers, 89 percent should have been completely or partially denied.