July 1995 Bulletin

Congress targets Medicare for big cuts

Academy urges total review to put program on sound basis

Once again Congress is considering extensive cuts for the Medicare program. In some proposals, these cuts are as high as $400 billion over the next seven years. In the past, through the "reconciliation process," this annual ritual has targeted health care providers. This approach has undermined the Medicare formulas for reimbursement, and has forced Congress to pit health care providers against one another, as each medical specialty attempts to escape the brunt of the budgetary ax.

Many patient and consumer groups have begun to recognize that these reductions may seriously undermine the quality of health care senior citizens now receive, and they are expressing concern about the depth of the reductions.

Even if Congress ultimately approves these cuts, the Congressional Budget Office predicts that Medicare will continue to grow by about 10 percent a year for the next decade. Instead of enacting short-sighted budget cutting measures, some in Congress are now advocating comprehensive Medicare program reforms.

The Academy believes that the Congress must undertake a complete review of the Medicare program to put it on sound economic footing. This reform must focus on all aspects of the Medicare program: financing, benefits and delivery of health care to enrollees, and payments to providers.

Such overall reform should be designed to put an end to the annual attempts to "balance the budget" by arbitrarily targeting the reimbursement rates for Medicare providers, or playing provider groups off against one another.

Moreover, any reforms must neither adversely affect the total range of health care provided to the elderly nor restrict access to appropriate medical care from specialists.

The Academy developed the following "talking points" on reforms to the Medicare program for the National Orthopaedic Leadership Conference in May.

Overall reform is necessary. Congress must clearly identify the factors which are driving costs in the Medicare program, and target reforms in those areas of increasing cost. During the last five years, Medicare expenditures for physician services have significantly decreased while other elements of the Medicare program have dramatically increased.

Short-term Medicare expenditure cuts do not provide any solution. More fundamental changes in the Medicare program are needed. Budgetary cuts only postpone and aggravate the existing state of affairs in the Medicare program.

Both health care providers and enrollees must make some sacrifices to take the steps necessary to put the Medicare program on sound financial footing.

Congress should encourage the use of Medical Savings Accounts, and provide for other tax incentives to alleviate future dependency of the Medicare program.

Physicians should support efforts by the federal government to eliminate fraud and abuse by providers participating in the Medicare program.

In its effort to control increasing costs, Congress should proceed cautiously before embracing the expansion of managed care in the Medicare program.

The recommendations of the Bipartisan Commission on Entitlement and Tax Reform could serve as an appropriate starting point for considering broad Medicare reforms. The nonpartisan commission was established by President Clinton in November 1993 to recommend potential long-term budget-saving measures through changes to the nation's entitlement programs and alternative tax reform proposals. The commission suggested several Medicare reform options, including:

- Prepared by the Academy's
Washington Office.

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