Will Medicare plan save $$?

WASHINGTON — An effort to wring $10 billion in savings from the Medicaid and Medicare programs as part of a GOP budget proposal would actually increase the deficit by $4 billion during the current budget year.

Higher Medicare payments to doctors and new Medicaid money for victims of Hurricane Katrina exceed the savings that would come from lower Medicaid drug reimbursements to pharmacies and other cost-cutting steps in the two federal health care programs.

Medicaid serves the poor and disabled, Medicare the elderly.

Doctors would be big winners under the bill. It would set aside $11 billion to forestall a 4.4 percent cut in Medicare payments to physicians that it is scheduled to take effect Jan. 1. Instead, they would get a 1 percent increase, a reprieve that would last only one year. But Congress is generally regarded as unlikely to let future payment cuts take effect, a stand that promises to cost upward of $150 billion over the next decade.

The plan released by the chairman of the Senate Finance Committee would become part of a $35 billion measure of spending curbs that is headed for debate in the full Senate next month.

Despite the short-term increase in the deficit, the proposal announced by Sen. Charles Grassley, R-Iowa, was a big step forward for Senate GOP leaders. For them, putting in place the budget blueprint that passed in April is a central piece of their fall agenda.

Grassley has been caught between the moderate and conservative wings of his committee over the plan.

Earlier this year, moderates such as Sen. Gordon Smith, R-Ore., rebelled over a $10 billion proposal to curb Medicaid costs. In recent days, conservatives protested a plan to provide Katrina victims with expanded Medicaid coverage.

Grassley predicted his committee would pass the measure on a party-line vote even though Democrats back many of its changes to the health care programs. But Democrats are withholding support, unhappy that conservative Republicans have delayed a separate bill to provide more generous Medicaid benefits to Katrina victims.

Democrats also object to Republican budget plans to use fast-track budget rules to advance $70 billion in tax cuts but only cut entitlement spending by $35 billion.

Grassley's plan would trim Medicaid by $7.6 billion over five years but add $3.3 billion, including $1.9 billion for Medicaid coverage for hurricane victims. An additional $800 million would help parents with severely disabled children retain Medicaid coverage and still earn wages above the poverty line.