Hospital Medicare Freeze Plan May Bypass Congress

The Reagan Administration plans to freeze Medicare payments to hospitals by administrative action rather than submit the issue to Congress for legislative action, sources said Wednesday.

The freeze is designed to save Medicare $2 billion in fiscal 1986 by denying hospitals a rate increase to cover inflation. News that it may be attempted by regulatory action brought expressions of surprise from Capitol Hill and sharp criticism from hospital groups, which want to take their case for a rate increase to Congress.

Rep. Henry A. Waxman (D-Los Angeles), chairman of the House Energy and Commerce subcommittee on health, said: “I’m appalled that the Administration intends to do this,” adding that the 1983 law setting up the prospective-payment system clearly intended some increases each year.

May Discredit System

“I fear that ratcheting down (on Medicare rates), either by legislation or administrative action, may discredit the prospective-reimbursement system before it’s really in place,” he added.

Most members of the Senate Finance Committee, aides say, had expected that the freeze proposal would be sent to Congress.

Sen. Dave Durenberger (R-Minn.), chairman of the Finance subcommittee on health, said through an aide that it would be foolish for the Administration to go ahead unilaterally when Congress is about to begin a delicate round of negotiations on overall budget cuts designed to spread the pain fairly and equally. He said administrative action along the lines being considered could make the hospital industry wary of cooperating on future hospital reforms.

‘Major Policy Change’

A spokesman for the American Hospital Assn. said the freeze “is a major policy change that ought to be reviewed by Congress. The law contemplated inflation adjustments of some type” each year.

Mike Bromberg, director of the Federation of American Hospitals, said: “I think it’s illegal.”

The 1983 law setting up the prospective-payment system, under which Medicare reimbursement rates per hospital case are set in advance, gave the secretary of health and human services the power to adjust the rates annually, without congressional action, beginning in 1986.

Bromberg said the law also contemplated annual rate increases and created a Prospective Payment Assessment Commission to recommend by April 1 what the increases should be, and required the secretary to take these recommendations into account.