$225 Million in New Medicare Cutbacks Announced by U.S.

The Reagan Administration, tightening the vise on health care costs, today announced more than $225 million in additional cuts in Medicare spending, to be achieved through new limits on payments for medical education and home health care.

In regulations published in the Federal Register, the Department of Health and Human Services imposed a freeze on payments under Medicare for subsidizing the education of interns and residents at teaching hospitals. That change will save $125 million next year, the department said.

The department also established new rate structures for home health specialists in fields such as physical therapy and speech pathology, saving at least another $100 million over the next three years.

The department said about 70% of such specialists will be affected, either by being pressured to lower their rates or by being refused full reimbursement.

Response From Roybal

The second change brought a sharp response from the chairman of the House Aging Committee, Rep. Edward R. Roybal (D-Los Angeles), who said it will “translate into millions of denied home health visits to elderly Americans.”

Roybal said the changes are particularly critical because other Medicare cost-saving measures are forcing patients out of hospitals sooner, making them more dependent on home health care.

The home health regulation affects payments to specialists in six fields--skilled nursing care, physical therapy, speech pathology, occupational therapy, medical social services and home health aides.

“I want to emphasize that these rules do not impose any new costs for beneficiaries, nor do they affect the number of visits an agency may furnish to Medicare patients,” HHS Secretary Margaret M. Heckler said in a statement. “But they will indeed apply needed pressure on the higher-cost home health agencies to bring their costs into line.”

However, the department noted that, if present billing practices continue unchanged, about 70% of the 5,640 home health care agencies participating in Medicare will violate the new cap and will be denied full reimbursement.

Expects Trimmed Rates

The department said it expects most of those specialists to trim back their rates to match the new caps. Roybal countered that most will instead pull out of the program, leaving Medicare patients without care.

The medical education freeze will affect primarily the nation’s 1,300 teaching hospitals, where medical school graduates provide supervised care and receive training while working as interns and residents.

In 1984, Medicare paid $1.13 billion in direct medical education costs--salaries for interns and residents and classroom costs--to 1,660 hospitals, almost all of them large urban hospitals. The assistance is paid in addition to payments for Medicare patients’ bills.

But the cost is going up, even though the nation is facing a surplus of doctors, the department said. It said that at present growth rates, the United States will have 35,000 surplus physicians by 1990 and 51,800 surplus physicians by 2000.

“Our nation has a growing surplus of physicians in nearly every area of medicine--and the demands on Medicare for medical education support should reflect that reality,” Heckler said.