Clinton's Revised Seven-Year Economic Plan: A Glimpse into the Future of Medicare and Medicaid

President Clinton's revised seven-year economic plan, unveiled in early December 1995, aims to ensure the solvency of the Medicare Trust Fund through 2011 and balance the budget by 2002. The proposal, which builds upon earlier plans, focuses on reducing Medicare and Medicaid spending while introducing new managed care options and reforms to the healthcare system. Despite its ambition, the plan has been met with skepticism by Congressional Republicans, who argue that it falls short of the $400 billion in savings required to balance the budget.

Key Takeaways:

• The Clinton plan proposes reducing Medicare spending by $124 billion and Medicaid spending by $54 billion over seven years, with the goal of achieving a balanced budget by 2002.
• The plan introduces new managed care options, including HMOs, PPOs, and provider networks, in an effort to streamline healthcare delivery and reduce costs.
• The plan rejects medical savings accounts (MSAs), citing concerns that they would "significantly fragment the Medicare risk pool."
• The plan contains provisions for a two-year transition to a single conversion factor for physician payments, as well as a plan to eliminate the Medicare volume performance standard (VPS) in favor of annual updates based on gross domestic product (GDP) plus 1%.
• The plan would reduce Medicare spending on physician services by $14.8 billion, with the biggest chunk of savings coming from moving to a single conversion factor to calculate all physician payments.
• The plan would expand an existing law that cuts "excess practice expense" payments for certain services, extend the payment cuts through 1997, and limit the reductions from 128% to 115% of the work payment.
• The plan would limit payments to groups of physicians practicing in hospitals with high-volume services, withholding 15% of each payment and requiring efficient management to receive a return.
• The plan would establish competitive bidding for clinical laboratory services, which would be reformed under a new system aimed at reducing costs by 15%.
• The plan would also introduce reforms to payment for automated lab tests, reduce overpriced oxygen payments, and introduce competitive bidding for Part B services and supplies.

Statistics:

• $124 billion: Proposed reduction in Medicare spending over seven years
• $54 billion: Proposed reduction in Medicaid spending over seven years
• $12.9 billion: Estimated savings from moving to a single conversion factor for physician payments
• $1 billion: Estimated savings from making the same payment to a primary surgeon, regardless of whether an assistant is used during surgery
• $600,000: Estimated savings from extending payment cuts through 1997
• $2.3 billion: Estimated savings from limiting payments to groups of physicians practicing in hospitals with high-volume services
• $3.2 billion: Estimated savings from establishing competitive bidding for clinical laboratory services
• $1 billion: Estimated savings from introducing competitive bidding for Part B services and supplies
• 15%: Proposed reduction in Medicare's fees for clinical laboratory services if the competitive bidding system fails to produce savings
• 14%: Projected annual growth rate in Medicare spending on durable medical equipment
• 20%: Proposed reduction in overpriced oxygen payments, phased in through 2002

Sources:

• "Clinton Unveils Revised Seven-Year Blueprint to Balance Budget by 2002." The Washington Post, December 1995.
• "Medicare Savings Plan Faces Skepticism in Congress." The Wall Street Journal, December 1995.
• "Clinton's Medicare Plan Draws Heavy Fire from Senate Republicans." The Los Angeles Times, December 1995.
• "AMA Rejects Clinton's Medicare Plan, Offers Alternative." The New York Times, December 1995.
• "Clinton's Budget Plan: A Look at the Numbers." USA Today, December 1995.