Shalala Proposes Strategy to Deal With Medicare Crisis

Unveiling a two-pronged strategy for rescuing Medicare, the Clinton administration invited congressional Republicans Wednesday to help devise a quick, bipartisan fix to keep the program afloat by trimming growth of payments to doctors, hospitals and other health care providers.

After the immediate crisis is averted, said Health and Human Services Secretary Donna Shalala, a special commission could be named to propose a solution to the longer-term problem: what to do about Medicare after 2011, when the huge baby boom generation begins reaching the eligibility age of 65.

Shalala said that the administration hopes to begin talks with Republican leaders in Congress soon after the election and work quickly next year to develop a legislative rescue package. The initiative would be designed to chop $100 billion from projected Medicare spending and provide another decade of solvency for the hospital trust fund, she said. At current spending rates, the fund will be exhausted in 2001.

Republicans, angered by political attacks over the Medicare issue, appeared to be in no mood to cooperate.

House Ways and Means Committee Chairman Bill Archer (R-Texas), whose panel writes Medicare legislation, suggested that Democrats stop running critical political advertising before floating the idea of a Medicare deal.

“To prepare the bipartisan groundwork necessary to save Medicare, the Clinton administration should immediately remove these false and misleading ads from the air,” said Archer, referring to a new series of commercials accusing GOP candidates of trying to slash Medicare. The ad campaign is sponsored by the Democratic Congressional Campaign Committee.

Agreeing that “the only solution to Medicare’s crisis is a bipartisan one,” Archer noted: “I am very concerned that while the secretary talks about bipartisanship after the election, the campaign arm of the Democratic Party is engaged in the worst partisanship possible.”

The Republican budget plan vetoed by President Clinton in 1995 would have reduced the growth of Medicare by $270 billion over seven years, slowing the rate of increase from 10% a year to 7%. Republicans are angry because Democratic candidates, from the president on down, continue to refer to the proposed reductions in future spending growth as “cuts,” even though total spending would continue to increase.

While the Democrats continue to air their Medicare commercials in the districts of GOP House freshmen, Shalala was far more conciliatory, promising cooperation. Saving Medicare will be her department’s top priority next year, she said during a breakfast meeting with reporters, and the Democrats cannot do it alone.

“I don’t think we will take on anything controversial while we do the short-term fix,” Shalala said. “Whatever we do will have to have 75% of the votes in both parties in Congress.”

Clinton and GOP congressional leaders will reach an early accommodation, she predicted. “We’ve got to sit and talk with them.” Shalala’s remarks clearly reflected an expectation that Clinton will be reelected and that Republicans will retain their majorities in Congress.

Shalala suggested that the two sides can find common ground by focusing on similar provisions in previous Democratic and Republican Medicare plans. “Somewhere in there we can get $100 billion,” she said. The solution, she predicted, will involve the “usual things we have done with providers--slow down growth in reimbursements.”

Organizations representing hospitals and doctors reacted negatively to Shalala’s suggestions, saying that they should not be forced to bear the brunt of future cost savings.

The administration is “trying to duck the tough choices, not realizing that providers, beneficiaries and taxpayers all have to make tough choices for these programs to survive,” said James Bentley, senior vice president for policy at the American Hospital Assn.

Both the short-term financing crisis and long-range reforms should be studied by a commission, said Bentley. “We would be willing to talk about cuts in context of immediate appointment of a commission,” he said.

Physician costs have not been the major cause of the recent surge in Medicare spending and it would be unfair to impose heavy new financial restraints on doctors, said James Stacey, a spokesman for the American Medical Assn. Other categories of spending, such as home health care, have grown very rapidly “and perhaps they should be looked at for savings,” he said.

The task of rescuing Medicare ultimately may force the president and Congress to go far beyond reducing reimbursements to doctors and hospitals. The $100 billion mentioned by Shalala is likely to fall short of the savings needed to ensure the system’s future health.

A Congressional Budget Office study in September predicted that it would take $200 billion to extend the life of the hospital trust fund until 2004. Achieving that level of savings--twice as great as Shalala’s target--would require more drastic steps than trimming payments to doctors and hospitals.

It could, for example, require significant reductions in payments to hospitals that train doctors and treat large numbers of poor people who lack insurance.

It could mean a major increase in Part B premiums, now $42.50 a month, paid by Medicare beneficiaries. And the upper-income elderly could face an additional premium.