Lawmakers Weigh Medicare Savings Plans : Budget: GOP proposals call for increasing costs to beneficiaries or adopting a voucher-like system. A third option would combine both approaches.

House Republicans--looking to save Medicare from projected insolvency in 2002--are considering proposals that would require the elderly to pay substantially more for government coverage or transform the program into a voucher-like system that would end direct federal insurance of the elderly.

Under one of three options prepared by Republicans on the House Budget Committee, the annual deductible paid by beneficiaries would jump from $100 to $150, monthly premiums would increase and wealthy beneficiaries would pay even more.

Those proposals, which would represent the largest change in Medicare since its inception 20 years ago, were released Thursday by House Republicans to illustrate how Congress could save the $280 billion over seven years mandated by the budget approved by the House Budget Committee early Thursday.

The Senate Budget Committee followed suit Thursday night when it approved a similar plan to balance the budget by 2002--a spending framework that differs from the House plan principally in its failure to make room for a $350-billion tax cut.

“I really believe we have done something rather historic,” said Senate Budget Chairman Pete V. Domenici (R-N.M.). Like its House counterpart, the Senate committee rejected a barrage of Democratic amendments to revise the GOP-drafted budget, which also called for slowing the growth of Medicare to save some $256 billion over seven years.

Neither committee can legislate the changes needed to make those savings in Medicare and other programs slated for reduction. But the policy assumptions used in setting those spending targets are instructive, if only as an indication of how drastically the program will have to be changed to save as much money as the Republican budgets would require.

Rep. Christopher Shays (R-Conn.), chairman of the committee’s task force on health, on Thursday released the Budget Committee’s detailed proposals on the three ways that Medicare could be changed to meet the budget target and save the program from insolvency. He sent those proposals to the chairmen of the two House committees that will be responsible for drafting legislation to change Medicare.

The first option suggests 35 cost-saving changes in Medicare designed in part to give the elderly powerful new incentives to enroll in health maintenance organizations and other less costly forms of managed health care rather than keeping Medicare’s traditional fee-for-service coverage.

In one change that would take effect in 1999, beneficiaries who choose fee-for-service coverage would have to pay $20 a month more in premiums than other beneficiaries, for savings of $3.8 billion over seven years. Current Medicare recipients would be exempt from that two-tier structure.

In another change, by increasing the Medicare deductible to $150 and indexing it to inflation in the future, Shays estimated that the government would save $15.2 billion over seven years.

The plan also for the first time would introduce an element of means testing in Medicare by requiring people earning more than $70,000 a year to pay a higher monthly premium.

All beneficiaries would have to pay new co-insurance fees for home health care, clinical laboratory work and certain nursing services.

The Republican proposals already have drawn heavy fire from the senior citizens’ lobby.

“What we see is budget cuts that seem to be driven more by the desire to hit a number than by the appropriate policy,” said Tricia Smith, chief health policy lobbyist for the American Assn. of Retired Persons.

Although the increases in beneficiary costs are likely to be the most controversial politically, the plan also includes major new restrictions on payments to doctors, hospitals and other health care providers. Even some who are sympathetic to the GOP goal of shifting more Medicare beneficiaries into private health plans and managed care think that the House budget plan goes too far.

“It’s designed to drive people to managed care and that’s not necessarily a bad policy,” said Thomas Scully, president of the Federation of American Health Systems. “But they are overreaching. They are being driven by budget policy, not health policy.”

A second option outlined by Shays would transform Medicare immediately into a voucher-like program, under which the government would buy private health insurance for the elderly rather than paying their medical bills directly. The amount paid would vary according to an individual’s age and other factors but the average payment would be $5,122 in 1996 and rise to $6,361 in 2002.

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Beneficiaries would have to pay extra if they chose more expensive plans, but would get rebates if they chose plans costing less than the federal contribution.

The third option is a combination approach that would adopt many of the cost-saving changes proposed in the first option--including increases in beneficiaries’ deductibles and cuts in payments to hospitals. It would assume additional savings as a result of more recipients switching to less costly private health care plans.

Times staff writer Jonathan Peterson contributed to this story.