House GOP Reveals Details of Medicare Savings Plan

House Republicans offered a detailed Medicare rescue plan on Friday that would encourage doctors and hospitals to bypass insurance companies by creating their own health maintenance organizations, potentially providing a major new source of low-cost care for millions of elderly Americans.

“Doctors and hospitals in many medium-sized communities say this is exactly what we need,” said Rep. Bill Thomas (R-Bakersfield), one of the key authors of the plan.

Moving more Medicare beneficiaries into HMOs is vital to meeting the Republican goal of slowing the growth of spending in the federal program. Along with releasing a detailed bill, the GOP also distributed a Congressional Budget Office analysis agreeing that the plan would reach its goal of saving $270 billion over seven years.

The CBO said reductions in the growth of payments to doctors and hospitals would provide $151 billion, the single biggest block of savings.

The House blueprint, like the plan now being considered by the Senate Finance Committee, would make a historic change in Medicare, imposing an absolute ceiling on total spending for the first time in the 30-year history of the massive health care program. The rate of growth, now surging at 10% a year, would be strictly controlled at 6.5%.

Republicans are confident that millions of beneficiaries will move voluntarily into HMOs and other forms of managed care, drawn by the offer of coverage for prescription drugs, dental care and eyeglasses, items that are not covered by Medicare. The GOP legislators believe that the fixed amount the government would spend each year per beneficiary (rising to $6,700 in the year 2002) would be sufficient to generate intense competition among HMOs seeking contracts to cover beneficiaries. Democrats argue that the money would not be enough and that beneficiaries would have to pay heavily from their own pockets for Medicare services.

Both the Senate and House proposals would increase the monthly premium paid by beneficiaries, now $46.10, to about $90 in 2002. But the Senate also would increase the annual deductible for doctor services, now $100, to $150 next year, and $10 more each year until 2002, when it would reach $210.

After releasing sketchy information twice in recent weeks, the House Republicans formally introduced their bill Friday and issued the 135-page text. The legislation would assure the solvency of Medicare until the baby boom generation begins reaching retirement age after 2011, according to Rep. Bill Archer (R-Tex.), chairman of the Ways and Means Committee, one of the two panels that will prepare the bill.

“Our plan will give senior citizens the same choices younger Americans enjoy,” said Rep. Thomas J. Bliley Jr. (R-Va.), chairman of the Commerce Committee, the other major committee handling the legislation. About 60% of all Americans covered by insurance at work are in HMOs or other forms of managed care, compared with just 10% of Medicare enrollees.

The CBO said the Republican plan would reach its target this way:

* By reducing the growth of payments to doctors, hospitals, laboratories and other providers by $151.5 billion.

* By saving $30.8 billion as HMO enrollment climbs to 25% of all beneficiaries.

* By raising the Part B premium, which covers doctors’ bills, to gain $46.1 billion.

* By raising an additional $7.5 billion through a higher Part B premium on individuals with incomes of more than $75,000 a year and couples with incomes exceeding $125,000 a year.

* By saving $2 billion through reduced fraud and abuse.

Another $32.1 billion in savings would come from a “fail safe” provision to be used only if the HMOs did not generate the large-scale savings predicted by the Republicans. The government would have the power to make additional reductions in payments to doctors, hospitals and other health care providers to help reach the target of $270 billion.

Thomas, noting that managed care is not readily available in many parts of the country, said that the House bill would make it easier for doctors and hospitals to create their own HMOs by exempting them from some state regulations.

Early this morning, the Senate Finance Committee approved the Senate GOP proposal to overhaul Medicare and Medicaid.

The panel did so after rejecting an attempt by Sen. John Chafee (R-R.I.), a pro-abortion rights Republican, to strike a provision in the bill that would write into law a ban on the use of government funds to pay for abortions, in this case for Medicaid recipients.

Currently, the issue comes up annually before both houses of Congress as a part of the appropriations process.

“That’s OK,” Chafee said. “Each year we get a shot at it. But if you put it in the Medicaid statute . . . there it is--in perpetuity.”

A number of other moderate Senate Republicans, though not Finance Committee members, also have expressed their concern about the codification of the ban on federal funding of abortions.

The National Abortion and Reproductive Rights Action League called such codification “unprecedented and alarming.”

But the bill faces a likely veto by President Clinton because he opposes the size of the GOP savings.

Meanwhile, the panel also voted to require states to provide health coverage for low-income pregnant women, children under the age of 13 and the disabled.

On Thursday the committee defeated a proposal by Sen. Alan K. Simpson (R-Wyo.) to require all Medicare recipients to pay $5 to $15 for doctors’ visits--on top of the usual 20% share of the bill.

Earlier this week, the CBO gave the Senate Republican Medicare plan a solid endorsement, saying that it indeed would save $270 billion over a seven-year period, just as the GOP claimed.