Bitter Pills for Medicare

When Congress slashed federal spending by $13 billion last week, the largest portion was $6.8 billion in costs saved in Medicare, the nation's health-insurance program for the elderly and disabled. Despite the size of the cuts, however, they were more a matter of bitter medicine than of major surgery, with doctors and patients sharing the burden.

The package included a 15-month freeze, starting July 1, 1984, on fees charged by doctors who accept Medicare payments. During that period, any doctor who increases his charges to Medicare patients could be subject to a $2,000 fine. Repeat violators could be disqualified from receiving payments from the program for up to five years.

The freeze is a form of price control aimed at the estimated 30% to 50% of doctors who charge their patients more than Medicare's established fees. Like most private health-insurance programs, Medicare has payment schedules showing how much each procedure should cost. Until last week's action, a doctor could charge pretty much what he pleased. If he charged the Government rate, Medicare paid him 80% of the bill and the patient made up the remaining 20%. If he charged more, the patient gave the doctor the full amount and Medicare reimbursed the patient for 80% of the lower Government fee schedule, a situation that hurt the patient but not the doctor. During the freeze, however, a doctor will face two choices. He can accept the Government's payment schedule for all his Medicare patients. Or he can continue as before, sometimes charging prices that, though frozen, are still higher than the Medicare rate. Either way, a doctor loses his freedom to raise prices for Medicare patients through Sept. 30,1985, thus saving the Government an estimated $2.1 billion.

Congress made sure that Medicare patients will feel the pinch as well. Those enrolled in Medicare's voluntary physician-services program, which covers doctor and outpatient care, will pay $21.30 in monthly premiums by 1987 instead of the $18.60 they would have paid under previous law. Additional health-cost savings will come from two other measures: the elimination of a Government allowance used by hospitals for the purchase of high-tech equipment and the establishment of a schedule for laboratory fees.

The reforms pleased deficit whittlers, but doctors and patients were disgruntled. The American Medical Association claimed that the fee freeze would needlessly interfere with its own campaign, undertaken last February, to persuade doctors voluntarily to freeze their charges to patients.

Some Medicare users fretted that although the premium change would hike their bills, the freeze would result in inferior health care. Said Joe Mazanek, president of Concerned Seniors of Dade County (Fla.): "If you are going to pay doctors less, they are going to find some way of cutting services."

Whatever its effect on the federal deficit, the health-cost bill is unlikely to remove Medicare from the critical list. Pressured by high-cost medical advances and a graying population, the $59.8 billion program, which serves some 30 million Americans, could go $97 billion in the hole as early as 1995. Said Eva Skinner, chairman of California's Legislative Coalition for Health Care Cost Containment: "Congress produced a quick fix to get us through the election."