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Show Communications The Future of Health Care Reform on a Federal Level Will the "Third Rail" be Touchable Soon? Allen R. Nissenson, M.D. UCLA School of Medicine and Robert Wood Johnson Health Policy Fellow in the Office of Senator Paul Wellstone. The demise of health care reform in the 103rd Congress was greeted with a collective sign of relief by many who felt the Health Security Act was developed in secrecy, was far too complex, and significantly worsened the American health care system. What was lost in this flurry of celebration were the basic driving forces for health care reform in this country, the increasing number of uninsured, and rising health care costs. Other pressing issues to have addressed in the Health Security Act included support for academic health centers and approaches to increasing access to care in rural and under-served areas. One can take little comfort in the most recent data on these same factors in 1995. During 1994, the number of uninsured continued to increase with over one million new individuals now without health insurance coverage, bringing the total to more than 41 million. Employer-based insurance continues to decline, particularly among small businesses where premiums have continued to rise, increasing nearly 7 percent last year despite slight premium decreases among large businesses. Overall health spending has slowed somewhat compared to the past five years, but most analysts feel this is a temporary phenomenon reflecting a low over-all rate of inflation, among other external factors, and not likely to last. Public sector spending continues to increase at a rate significantly greater than general inflation, with Medicare expenditures growing nearly 11 percent in 1994. Although some increase is attributable to an increase in the number of patients enrolled, increased per capital costs remain significant. It is upon this backdrop that one must view the future of major health care reform in the 104th Congress. This Congress will be driven by two major factors: (1) the overwhelming need to reduce the deficit (and balance the budget by 2002), and (2) the 1996 presidential election. The former presents significant health policy issues that must be addressed, and the latter provides the political context in which the policies will be debated. In order to reduce the deficit, expenditures on Medicare and Medicaid will have to be decreased. Medicare currently accounts for nearly 21 percent of entitlement outlays, while Medicaid accounts for an additional 11 percent. These two programs exceed the sum of all other entitlements (excluding the largest, Social Security) in their receipt of federal funds. The Republicans are likely to propose changes in Medicare including (a) making Medicare Select available in all states, (b) limiting the inflation factor for hospital payments, (c) eliminating indirect medical education payments, (d) reducing payments to Disproportionate Share Hospitals, (3) extending the Medicare as secondary payor provision, and (f) creating a "voucher" system with a fixed payment to seniors (if they can buy services primarily through managed care systems) for less than this amount they will be able to keep the difference, or a part of it. Republicans hope to find a $260 million savings in Medicare over seven years with these approaches. Democrats will be opposing many of these changes vigorously. They will be reiterating that these proposals will be changing the very nature of Medicare, which was created as an insurance program with defined benefits, not a promise of a fixed annual payment for seniors. The concern is clearly that the amount of the "voucher" will be capped, resulting in an erosion of benefits as the cost of providing services by health plans rises. In addition, as an incentive to purchase inexpensive plans, the proposal to let seniors keep part of the savings achieved will be opposed by Democrats who feel all savings should be returned to the program. What is likely to happen? Republicans have proposed formation of a bipartisan commission on Medicare to report to the Senate by early July 1995 to recommend a plan to restructure the program in order to achieve the savings needed to balance the budget by 2002. Democrats are reluctant to participate and are currently leaving the ball in the Republicans' court. Whether a compromise will result in the formation of the Commission remains to be seen. Whatever comes out of the Commissions if it is formed, will be highly contentious. Medicare cuts are likely to occur with many of the Republican proposals as the mechanism. The real question is, "How deep will the cuts be?" Medicaid, the other major public program, will be an equally difficult problem. Republicans are committed to block granting this program to states with removal of the entitlement status. Saving of $160 million are projected by block granting and placing a cap on the growth of the program at around 4 percent. Democrats are wary of block granting in general, and the level of the cap on spending is of particular concern. Utah's Health: An Annual Review 1995 133 |
