Clinton Budget Takes Early Swipe At Soaring Health Care Costs

AS the president's Health Care Task Force heads to the finish line with a plan to overhaul the nation's health-care system, the government's share of the tab continues to climb.

In its first bid to get hold of runaway costs, the Clinton administration last week proposed cutting back on Medicare and Medicaid, pegged as the culprits behind the government's soaring health-care bill.

In his $1.5 trillion budget for 1994, President Clinton recommends slicing $3 billion from Medicare and Medicaid in fiscal 1994 and $53 billion over five years. The Medicare budget for 1994 would then top $161 billion, while Medicaid would come in at $92 billion. Medicare provides health insurance mainly to the elderly; Medicaid, to the very poor and disabled.

If changes to these programs are not made, their costs will outstrip deficit-reduction efforts now under way, budget director Leon Panetta said at a briefing last week. Their costs will account for 50 percent of the growth in the federal deficit over the next five years, budget documents say.

As spelled out in the budget, Medicare costs would be scaled back by reducing payments to hospitals and specialist physicians. The administration has said it will take steps to encourage the delivery of care by generalists, because it deems such care more cost-efficient than that provided by specialists.

Physicians, such as generalists, spared under this round of cuts see them as a red flag that may signal future declines in payments.

"Internists are concerned that continued cuts in Medicare will compromise their ability to provide patients with appropriate care," Richard Ruppert, president of the American Society of Internal Medicine, said at a recent congressional hearing.

More cuts not specified in the president's proposal are on the way, a health official said. White House projections this year overestimated the amount that would be saved through deficit-reduction initiatives like cuts in Medicare and Medicaid. "The ultimate bottom line is the president is going to have to come up with another $3 billion in savings" across the budget, he said.

For weeks now, other administration officials have mentioned possibly putting a price freeze on doctors, hospitals, and drug companies.

At recent hearings on Medicaid, some congressmen expressed skepticism that the budget and health-reform proposal would do enough to ratchet down spending.

Senator John Danforth (R) of Missouri said he and other senators favored a cap on entitlements. "A cap on entitlements sounds quick and easy, but it is hard to implement. We believe in a more systematic way to control costs," responded Secretary of Health and Human Services Donna Shalala.

The president's budget for Medicaid would limit the federal match for Medicaid administration to 50 percent (it has been as high as 75 percent in some states); eliminate the requirement that personal care be covered; allow states to direct patients to a central drug formulary, rather than pharmacies; and close loopholes allowing those who aren't poor to receive Medicaid.

Raymond Scheppach, executive director of the National Governors' Association, said the bottom line is that the match-rate proposal is "nothing more than a cost shift to the states."

Medicaid, jointly funded by states and the federal government, served 31 million people in 1992. Between 1990 and 1991, Medicaid spending grew 27 percent. This compares with about 12 percent growth for Medicare and 9 percent growth for private insurance. Under the budget, Medicaid growth would be wrestled to 15 percent in 1994.

In the longer term, Medicaid - a program disliked by many physicians and of great financial concern to states - would be abolished. "We expect to fold Medicaid into a health-reform plan," Ms. Shalala says.

In a briefing last week, task-force officials said the poor would receive government-subsidized care under the new health-care plan, which is due to be released around May 17 but will not be fully implemented for at least five years.