July 1995 Bulletin

Major changes seen for Medicare

NOLC speakers tell need to slow growth

Fundamental changes in Medicare are on the table in Washington these days as legislators try to implement a budget plan that will eliminate the federal deficit in the years ahead.

"Medicare and Medicaid have been growing at 10 to 10 1/2 percent annually and it doesn't take a neurosurgeon to realize that in about 20 years at that kind of rate of growth, we would be spending all of the federal budget on health care," said Rep. Greg Ganske (R-Iowa), a guest speaker at the National Orthopaedic Leadership Conference (NOLC) in May. Like other speakers at the NOLC, Rep. Ganske pointed out that the trustees of the Hospital Insurance (Part A) of Medicare predict Part A will be insolvent by the year 2001.

"To say that this is a difficult problem is an understatement. We can look at inefficiencies in the system, and we can look at waste, fraud and abuse. But we're not going to come up with the kind of numbers to be fiscally responsible."

Short-term solutions like means testing, and deductibles for more services "will only get us about 40 percent to the goal," he said.

Managed care

That's why there is a need for more fundamental changes and one of the ideas gaining support on Capitol Hill is managed care for Medicare, Rep. Ganske said. Other changes could be patient vouchers and medical savings accounts, he said.

"I also fundamentally believe that we need to have some antitrust law changes that would involve how physicians can contract with what I see developing as some significant monopolies in this country," Rep. Ganske said.

Sen. Bill Frist (R-Tenn.), another NOLC speaker, also painted a bleak picture of the future if changes are not made in government spending. In ten years, Social Security, Medicare, Medicaid, pensions for federal employees, and interest on the federal debt will consume all tax revenues, meaning there will be no money left for defense, education, or infrastructure such as roads, he said.

Although Medicare spending presents enormous problems, he said "there is not a Medicare plan on the table now to accomplish what needs to be accomplished."

Sen. Frist said the goal in the Senate (at the time of the NOLC) was to lower the growth in Medicare spending to 7 percent from 10 percent a year.

Lengthy process

After the budget resolutions were adopted by the House and Senate, a conference committee has to resolve differences in the resolutions. Then committees in the House and Senate have to determine how to implement the targets. The process will take many months as House and Senate committees approve appropriation and reconciliation bills, which then have to go to conference committees to resolve differences before the final versions are ready for final votes in Congress and sent to President Clinton.

Rep. Jim McCrery (R-La.) said the proposed reduction in Medicare spending envisioned in the House budget resolution is so large that the House Ways and Means committee's efforts to make changes in the program could take until September to be completed instead of June or July as it has in the past.

"The only way I think we can achieve the level of savings and continue to provide the kind of health care the folks in this country are accustomed to is to basically privatize Medicare," Rep. McCrery said. He stressed it was his personal opinion and he didn't have much hope that it would be adopted. His solution is to give individuals a specific amount of money to spend on a health care insurance. This would be accompanied with insurance reforms, medical malpractice reforms, and antitrust reforms to get the health care marketplace competitive and efficient and "to give seniors in this country a chance to continue to receive the level of services they are now receiving and at a very high level of quality."

However, Rep. McCrery said, "I believe what we're going to end up with is kind of a mix of the old solution of just cranking down on reimbursement levels and beneficiary charges." Options and incentives will be offered to seniors to bring costs down in the long-term. "Those options, of course, will be managed care, primarily, and perhaps a medical savings account," he said.

After one or two years, if the savings aren't sufficient, Rep. McCrery said, "we will have to go back to the old methods of cranking down reimbursement rates, changing the program, increasing copays, deductibles, whatever, for beneficiaries."

During a question and answer period, Rep. McCrery said he expected some regulations for HMO operations. "They'll be designed to protect the patient from unscrupulous practices, however, let me just warn you," he said, "when you're talking to the government, be careful what you ask for, you just might get it."

Answering a question about why the government was enamored with managed care, he said that there have been some successes with it, however, "the jury is still out on managed care. I think managed care is basically a convenient mechanism for rationing.

"We're going to have to ration health care in this country, one way or another."

There were three choices, he said. One is top-down rationing which is the government running the health care system, middle-down rationing which is managed care, and bottom-up which is medical savings accounts allowing individuals to look out for themselves."

He prefers the individual making the decisions on utilization of health care services, but adds, "Where is it going to end up? If I had to bet, I'd bet the government is going to do it."

Sen. Bill Frist (R-Tenn.) tells need to reform Medicare.

Rep. Jim McCrery (R-La.) expects Medicare reforms to be a mix of old solutions.

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