Government Puts a Few More Notches in Tightened Belt

Americans may be suspicious of big government, but they still want it to do big things for them.

And starting today, the federal government will do its best to comply. Among the myriad new rules, regulations, policies and programs taking effect with the new year are many that attempt to squeeze more federal services from less bureaucracy.

It will be a year of innovative experiments based on conservative budgeting, of trying to make the leviathan government work better and smarter without spending a dollar more than necessary.

Some examples:

* For 12 million taxpayers, an invitation to file truly paperless tax returns, using a number sent through cyberspace in lieu of a signature.

* For Medicare beneficiaries, more new forms of health care delivery, including a plethora of competing HMOs and the promise of alternative health plans run by doctors and hospitals.

* For baby boomers worried about their aging parents, the first mass trials of Vitamin E and other compounds that could prevent loss of memory associated with Alzheimer’s disease.

* For the growing army of stay-at-home entrepreneurs, liberalized rules for claiming an office deduction without alienating the IRS.

* For women who have had mastectomies, a guarantee that their health insurance plans will pay for reconstructive breast surgery.

The common theme is incremental change rather than a dramatic alteration in the fabric of government. There is neither the dramatic liberal expansion of government offered by the ill-fated Clinton health plan of 1993 nor the conservative dismantling of the welfare state envisioned by conservatives who rejoiced when Republicans regained control of Congress after the 1994 elections.

Instead, the public seems to be telling Washington to make the existing machinery run better. Congress, in turn, is passing the laws and civil servants are carrying out the regulations needed to meet that mandate.

“Click, zip, fast round trip,” the IRS promises in a postcard mailed to 12 million taxpayers inviting them to participate in the first “truly paperless return.” Up until now, even those people who have prepared their returns on computers have been required to print, sign and mail them.

The new IRS effort, called e-file, gives participating taxpayers personal identification numbers that will serve as “electronic signatures.” Eventually, the IRS hopes to get most tax returns filed this way.

Although Medicare HMOs recently garnered bad publicity by pulling out of markets serving about 400,000 beneficiaries, there will be an expanded number of competitors this year. Twelve new plans approved by the federal government will begin enrolling people this month, and 25 more are in the regulatory pipeline.

Federal officials are looking forward to the establishment of new plans operated by doctors and hospitals, to compete with traditional HMOs and insurance companies.

Some of the new programs “are religious-based plans, and those kind of plans tend to be pretty popular,” said Nancy-Ann De Parle, head of the Health Care Financing Administration. De Parle’s agency runs Medicare, the program that helps pay hospital and doctor bills for 40 million Americans who are older than 64 or disabled.

One of the great challenges facing America in the 21st century will be dealing with the costs of an increasingly aged society as baby boomers--those 76 million people born in 1946 through 1964--head for their retirement years.

In particular, experts say the ranks of those with Alzheimer’s disease could swell dramatically, wreaking a terrible physical, emotional and financial toll on families.

The National Institute on Aging will begin recruiting volunteers for a test of Vitamin E and a mystery compound not yet publicly identified to measure their efficacy in slowing mental decline. For the first time, the government will be looking at people who don’t have Alzheimer’s but are showing some memory problems to see if the descent can be delayed.

The goal here, as with other government efforts, is to stretch federal dollars as far as possible. It could take decades and billions of dollars to even attempt to find a cure for Alzheimer’s. The development of short-term therapies could prove effective because the disease is most common in people older than 85. If mental decline is delayed, many would die of other causes, often with less trauma for them and their families.

NIA researchers also are piggybacking on other studies: one looking at aging women and the use of Vitamins C and E in preserving cardiovascular health, and another examining the effect of estrogen on the health of post-menopausal women. In both cases, the NIA is contributing questionnaires to measure the mental acuity of the women as they age.

“We don’t have to round up thousands of people for our own separate study,” said Dr. Marcelle Morrison-Bogorad, head of the NIA’s neuroscience program. “There is going to be a tremendous cost savings, running into the millions of dollars.”

The population of self-employed Americans grows each year, and with it the anxiety associated with wondering whether a home office deduction might trigger an IRS audit. Starting this month, the rules will be eased.

Until now, a home office had to be regularly and exclusively used for conducting the business itself. In the future, a home office can also qualify if it is used as a place to handle the managing of the business, meaning a place to keep records and pay bills. For example, a doctor who sees patients at various hospitals can claim a home office deduction for the space she uses “to conduct her administrative or management activities,” according to a tax planning guide by Deloitte & Touche, an accounting and consulting firm.

Easing the standards presumably will lead to less intrusion by the IRS on the self-employed, experts say.

*

Times staff writer Alissa J. Rubin contributed to this story.