New Protection Likely for Medicare Patients : Administration’s Proposal Calls for Unlimited Hospital Care Days, Ceiling on Physician Bills

In a move that could affect 30 million of the nation’s elderly and drastically alter Medicare rules that have stood for more than two decades, Congress appears virtually certain to give the system’s beneficiaries major new protection this year: unlimited days of hospital care and a ceiling on how much they must pay for hospital and doctor bills.

The sweeping proposal is the work of Otis R. Bowen, the secretary of the department of health and human services. He paved the way for the changes with his yearlong campaign for “catastrophic care” for the elderly, and he has gotten his message through to the White House and Congress.

Despite the vagaries of politics, passage of a Medicare cost limit this year seems “as sure as a slam dunk,” said Rep. Pete Stark (D-Oakland), chairman of the House Ways and Means subcommittee on health.

Fundamental Shift

The proposed spending ceiling would represent a fundamental change in Medicare, which has had the same basic benefit package since it was created in 1965. Moreover, although details of the plan are certain to be the subject of much disagreement, its progress so far is the result of a broad bipartisan consensus that something must be done to improve the Medicare system.

Bowen’s plan “has already accomplished what is likely to be its greatest success: It has launched the public debate on catastrophic health care,” Sen. John Heinz (R-Pa.) said. Among Democrats, Rep. Edward R. Roybal (D-Los Angeles), chairman of the House Aging Committee, praised Bowen “for having the courage to recognize the magnitude and breadth of the catastrophic health problem.”

President Reagan is expected to give the principle of protection against financially catastrophic illness his blessing in the State of the Union address Tuesday, although he and many members of Congress seem certain to disagree over the details and financing of the new benefit.

Currently, a Medicare beneficiary spends $520 for the first day of a hospital stay and gets the next 59 days free of charge. Then, however, the beneficiary must pay $130 a day for a month and even more after that. Under the revised benefits, the patient would still pay for the first hospital day but then would get an unlimited number of free days.

For doctor bills, Medicare now pays 80% and the individual 20% of government-approved schedules of estimated typical costs. If a doctor charges more than these approved estimates, the patient must pay the difference.

Under the revised rules, a beneficiary would continue to pay the 20% share of physician’s bills until these costs, combined with that of the first day of a hospital stay, reach whatever limit Congress decides to set.

Influential Democrats and Republicans believe that the most likely package would set a limit of $1,500 to $2,000 for a Medicare beneficiary’s total personal spending for hospital care and a physician’s services. Patients would still be responsible for any doctor bills that exceeded the Medicare schedule.

Although a relatively small number of Medicare beneficiaries suffer lengthy hospital illnesses, the threat of such financial catastrophe needs to be addressed, said Sen. Lloyd Bentsen (D-Tex.), chairman of the Senate Finance Committee. “We’re trying to give them some sense of security by doing this and paying for it with a fairly nominal premium,” he said.

Among the Medicare population, an estimated 200,000 people a year spend more than 60 days in the hospital, and about 2 million people spend more than $1,500 a year for doctor bills.

Monthly Premium of $4.92

The new benefit would cost anywhere from $3 billion to $5 billion a year, depending on the ceiling. Bowen’s plan, and its $2,000 limit on individual spending, would be financed by a premium of $4.92 a month, paid by Medicare beneficiaries.

Stark, by contrast, would seek a lower ceiling of about $1,500 and a variable premium that would correspond with income. In the Senate, Bentsen, whose committee would handle the legislation, also favors this approach.

Reagan has proposed extending the Medicare payroll tax to state and local government employees, who can receive the benefits but do not pay taxes to finance them. Stark said that these funds should be used to help pay for the new Medicare benefit, but the Reagan Administration wants the money to help cut the general budget deficit.

Ironically, some of the greatest opposition to Bowen’s plan comes from his colleagues in the Cabinet and conservatives, who argue that the proposal would betray the Reagan philosophy by expanding the role of government. The plan, they argue, competes with the private insurance industry, which sells policies that supplement Medicare coverage.

But many beneficiaries might drop such insurance because the new plan would provide protection against the most expensive costs of health care. Some, however, might opt to retain such policies, which would pay for the first day of a hospital stay and doctor fees not covered by Medicare, as well as other benefits such as the cost of prescription drugs.

Proposed a Year Ago

Bowen, who originally proposed his plan a year ago, was confident last year that the President would back it in his 1986 State of the Union message and quickly send a bill to Congress. Instead, the President called for Bowen to conduct a comprehensive study of catastrophic health care and give the White House a report.

Since then, the secretary has learned the ways of Washington maneuvering. Instead of sending the report confidentially to the White House, where the proposal might have died quietly, Bowen announced the plan at a news conference late last year, giving the proposal a life of its own.

The insurance industry, noting that 70% of the people over 65 already have supplementary policies, argues against the need for such legislation.

“Our industry is already beginning to respond on a voluntary basis to provide what Bowen wants or more,” said James Moorefield, president of the Health Insurance Assn. of America. In addition, he said, the label “catastrophic care” is misleading because “a lot of people may be deceived into thinking the Bowen plan or the Stark plan covers everything.”

For example, neither Medicare nor the overwhelming majority of private insurance policies will pay for the typical prolonged stay in a nursing home, which involves custodial care, rather than medical treatment. Such financial catastrophe can cost $2,000 a month or more.

Nightmare for Congress

Providing the middle class with direct help by spending more federal dollars for nursing homes is a nightmarish prospect for members of Congress.

“We’re afraid to address the problem because we know the costs are tremendous,” admits Sen. Lawton Chiles (D-Fla.), chairman of the Senate Budget Committee. Instead, the burden of deciding who gets help goes to the states. Under state laws, a person seeking assistance with nursing home costs can qualify for help only if he declares himself impoverished and receives aid through the Medicaid welfare system.

“Going to the indignity of welfare is a mean-spirited way to treat elderly people,” said Rep. Henry A. Waxman (D-Los Angeles), who is preparing a bill that would protect the income of a person whose spouse goes into a nursing home.

Although Congress will discuss the financial burden of nursing home care this year, as well as the threat to more than 30 million Americans under 65 who have no health insurance at all, the federal budget deficit makes action unlikely on such expensive problems.

Thus, legislative action is expected only on the creation of a spending ceiling for the people covered by Medicare: 27 million people over the age of 65 and 3 million disabled people of all ages.

Some members of Congress are optimistic, believing that this year’s debate will move the nation closer to a more ambitious federal health program.

Roybal Offers Proposal

Roybal has proposed a “US HEALTH” act, which would be financed by higher taxes and cover all health costs, including nursing home care, with a $500 annual limit on out-of-pocket spending by individuals.

Sen. John Melcher (D-Mont.), chairman of the Senate Aging Committee, said that he will keep pounding at the issue with committee hearings “until we establish a priority, saying the need to help people with staggering medical expenses is as important as a couple of new battleships or a pay raise for Congress.”

However, Stark said the incremental approach works best.

“The question is are we going to expand the benefits? The answer is absolutely,” he said.

“Mine is the head-in-the-tent theory. I’ll write and sign on as a joint sponsor of a huge omnibus health care program, but I’ll take whatever I can get, a piece at a time.”