The Bush administration will back substantial Medicare cuts of $3.5 billion to $5 billion for fiscal 1990 as part of an initial effort to cut the federal deficit, some Bush advisers and budget experts predicted Thursday.
They said any suggested cuts, at least at first, are unlikely to involve drastic changes or major restructuring of the $80 billion program, although such proposals may come later.More likely, according to experts consulted by Bush transition aides, initial cuts would be based on the Reagan administration's fiscal 1990 budget proposals being prepared for submission to Congress.
Bush may favor somewhat bigger or somewhat smaller cuts in some items than President Reagan will propose or a slightly different configuration, but he'll be in the same ballpark, the aides and experts said.
Depending on how details are worked out, the 1990 cuts could mean savings of as much as $15 billion a year by fiscal 1995. (All such savings, in the budget world, are measured not by comparing them with what is being spent today, but by comparing them with what would be spent if current law remains in effect and if increases were made to account for inflation and population change.)
The new administration's intention to look at Medicare as a major source of budget savings was signaled Tuesday by Richard G. Dar-man in statements shortly after President-elect George Bush selected him as Office of Management and Budget director.
However, even incremental cuts in the $3.5 billion-to-$5 billion range would be difficult to get through Congress because the American Hospital Association, the Federation of American Health Systems, medical groups and spokesmen for the aged fear some of the cuts could hurt their members or reduce the quality of medical care.
AHA Vice President Jack Owen said that new cuts in payments to hospitals "in the long run would affect access to care and technology. You're going to see more hospitals closing."
John Rother of the American Association of Retired Persons said any proposals to increase cost-sharing by beneficiaries, to cut benefits or to reduce eligibility "harms those the program is designed to protect."
Among proposals expected to bebacked in some form by the Bush administration are the following, which are now being considered by the Reagan administration for its fiscal 1990 budget:
- Hold the increase in the amounts Medicare pays hospitals to compensate for inflation down to 2 percentage points less than the expected 5.7 percent rise in the costs of things hospitals buy.
This would save almost $1 billion in fiscal 1990 compared with what would be spent if a full 5.7 percent increase were granted. If the same formula were used for the next five years, it would reduce Medicare payments to hospitals over five years by more than $15 billion, according to some estimates. A total freeze on the increases could save even more.
- Keep the "Part B premium," the premium that Medicare recipients pay for the doctor-insurance part of the program, high enough to pay 25 percent of basic program costs, instead of letting it slip to a lower share in 1990, as permitted under current law. (The Treasury pays the other 75 percent.) This could save about $400 million in 1990.
In 1989, the monthly premium for all recipients will be $31.90 a month plus a supplemental premium, based on income, for higher-income elderly. Raising the premium enough to cover 28 percent or 29 percent of the Part B cost would up the savings to $1 billion.
- Cut the direct and indirect subsidies that Medicare pays to hospitals for various teaching and intern costs, saving the program up to $1 billion in 1990, depending on details.
- Keep the amounts Medicare pays hospitals for their capital outlays at 15 percent less than Medicare's traditional "fair share" of capital costs, saving about $800 million in 1990.
- Increase Medicare payment rates to doctors each year less than needed to compensate fully for inflation; cut payments for various "overpriced" doctor services; review the need for certain services more closely, and make various other shifts in payments to doctors to save money. Savings of hundreds of millions of dollars or more would be possible, depending on alternatives chosen.
A total freeze on payment rates for a year or an actual 10 percent rate cut for a year would save more money but would face much tougher doctor opposition. Because Medicare payments to doctors are the fastest-growing major part of the program, Bush and Congress may focus especially on curbing doctor payments, according to the experts.
- Allow Medicare to take longer than 20 days to pay its bills to hospitals.
Medicare has long been an attractive source of budget cuts. Cutting it would help hold down the rapid escalation of government and private national spending on health, which has risen to 11.1 percent of gross national product, the highest of any major developed nation.