GOP Action on Medicare Sets Off Debate

An agreement by Republican congressional leaders to restore $28 billion in previous Medicare cuts set off a fiery debate Thursday over how much of the money should go to health maintenance organizations and on what terms.

The legislation endorsed by GOP leaders would provide $10 billion in additional direct and indirect payments to HMOs over five years. In some parts of the country, HMOs have abandoned the Medicare market and the elderly Americans who joined their plans, citing inadequate Medicare reimbursements.

The GOP-backed legislation would provide hospitals with $8 billion in additional funds over five years. Hospitals account for a much larger share of Medicare spending than HMOs, and many experts say that they were harder hit by the 1997 funding cuts that the new legislation is designed to ameliorate.

In addition, Republican leaders removed from the measure proposed funds to provide health care to legal immigrant children and pregnant women. They also left out money requested by President Clinton to reduce the elderly’s Medicare co-payments for preventive health care services.

A number of state hospital associations and the nonprofit Catholic Health Assn. expressed dismay at the GOP approach, saying that it would not do enough to shore up the nation’s hospitals, which in some states have been dipping into reserve funds to keep their doors open.

White House officials said they were disappointed in the bill, which could be taken up by the House and Senate early next week. If a more acceptable compromise is not worked out, they said, Clinton would veto the measure.

With both sides refusing to back down, the entire funding proposal appears at risk. The standoff illustrates the increasing difficulty Congress faces in making critical compromises on the eve of next month’s elections. In 1997 and 1999, disputes over Medicare funding were resolved on a bipartisan basis, despite the many powerful political constituencies involved.

Republicans defended their funding choices, saying that they accommodated some of Clinton’s requests and directed more money to HMOs in hopes that the additional funds would entice managed care plans to return to markets they have abandoned.

“It is important to provide relief for health plans, particularly the Medicare-plus-choice plans,” said Rep. Thomas J. Bliley (R-Va.), chairman of the House Commerce Committee.

Currently, about 6 million people are enrolled in Medicare HMO plans, or about 16% of all seniors and disabled people covered by Medicare. Nearly 1 million of those will be dropped by their HMOs next year, although some are expected to enroll in other managed care plans. In addition, about 700,000 have been dropped over the last couple of years. In addition, many members also face higher premiums and more restricted prescription drug coverage, which has been one of the most attractive extra benefits offered by Medicare HMOs.

White House officials, who were excluded along with congressional Democrats from the negotiations that led to the funding package, called for a bipartisan compromise that would provide more money for hospitals, co-payment reductions and coverage for legal immigrant pregnant women and children.

“Their priorities are reflected in their policies,” said Chris Jennings, senior health advisor to the president.

As a condition of receiving the big funding increase, Jennings said, HMOs should be required to agree to remain in a county for at least three years so seniors would have some confidence when they enroll that they would not have to change doctors or plans.

That suggestion was immediately rejected by Karen Ignagni, president of the American Assn. of Health Plans, which represents managed health care plans nationwide. “When you’ve had a situation where the program has been underfunded and over-regulated, to then say we should be talking about a lock-in is just not possible,” Ignagni said.

HMOs maintain that the government is severely underpaying them, forcing many plans to stop providing coverage under Medicare. Ignagni said that she hopes the additional funds will help plans restore coverage in some areas.

“I don’t know that anybody’s gone back into markets that they’ve left,” said Roger Cruzan, a spokesman for United Healthcare, a leading managed health care company.

Hospitals are divided on the GOP funding formula. The national organizations, who must work regularly with members of Congress and whose representatives were asked to read the legislation and line up behind it, expressed satisfaction. But state-based organizations, which tend to be more independent, said it leaves hospitals at real risk.

The California Healthcare Assn. and five other hospital associations, including those in Texas and New York, said in a letter sent to the New York Times that the proposed funding disproportionately favors HMOs.

“The landscape here in California is very bad,” said Jan Emerson, director of media relations for the California Healthcare Assn. “Sixty-four percent of the hospitals are losing money from giving patient care and one-third of all hospitals are existing solely on reserves now. The reasons are multiple but the federal cuts are a huge piece of it.”

For academic medical centers, which treat many patients without insurance, the picture is even worse. “I would veto it if I were president,” said Dr. Gerald Levey, provost of health sciences at UCLA, where net income at the medical center has plunged nearly $50 million in the last two years.

“If you put this in the mix with what we receive from managed care organizations, it’s devastating to our overall mission” of patient care, teaching and research, Levey said.

*

Times staff writer Julie Marquis in Los Angeles contributed to this story.