A vision of change for America.

  • United States. President (1993-2001 : Clinton)
Date:
[1993]
     government’s subsidy to survivors. Estimated savings over 1994-97: $350 million. Estimated 1997 savings: $140 million. Veterans Affairs/Down payment, fee for multiple use of loan guarantees. Under current law, there is no limit on how many times a beneficiary may use the VA loan guaranty program. Multiple-users are charged the same fees as one-time users, and are not required to make a down payment. Allowing borrowers who have already received home-ownership assistance to remove the equity from their existing homes and purchase another home (with zero equity) with VA-guaranteed financing, exposes the Government to additional risk. The Administration proposes to require a 2.5 percent fee and a 10 percent down payment for multiple-use of the loan guaranty benefit. This will provide savings because of the fees and because it will reduce foreclosures. Estimated savings are $17 million in 1997, $68 million over four years. Veterans Affairs/Permanently extend resale loss provision. When a private lender forecloses on a VA guaranteed property, VA uses a formula for determining whether to pay the guarantee to the lender or acquire the property from the lender and resell it. The Administration proposes to make permanent the inclusion in that formula of expected losses on the resale of foreclosed properties. This requirement makes property acquisition more cost-effective to the Federal government and is consistent with the practices of private mortgage lender. Estimated savings over four years are $80 million, including $21 million in 1997. Treasury/Reform U.S. Customs Inspector overtime laws. Customs Inspectors receive compensation for overtime work at rates different from most other Federal employees. Current law contains quirks that tend to provide strong incentives for wasteful overtime scheduling practices and other abuses. The Administration proposes to eliminate these opportunities for abuse, reducing required overtime payments by an estimated $72 million over the 1994-1997 period, and $18 million in 1997 and to make necessary changes in the law to ensure that savings from overtime reform are used to reduce the deficit. Interior/Mariana Islands funding agreement. A recent agreement with the Commonwealth of Northern Mariana Islands, a U.S. territory, reduces Federal support for the Commonwealth and directs it toward infrastructure projects only. In addition, the agreement gradually eliminates Federal funding. Implementation of this agreement would save an estimated $31 million in 1994-1997, including $10 million in 1997. Veterans Affairs/Insurance administration costs. The Administration proposes that the administrative costs of three of the five VA life insurance programs be paid with excess revenues from those programs, rather than from annual appropriations. This would reduce the $30-million-a-year taxpayer subsidy to these programs, which pay dividends of over $1 billion per year to policyholders. The estimated savings are $31 million in 1997 and $113 million over four years. aD
     Veterans Affairs/Internal Revenue Service income verification. The Admini- stration proposes to extend permanently the Department of Veterans Affairs’ authority to access IRS tax data to verify income reported by pension and medical care beneficiaries. There are no savings from this extension in the 1994-97 period. Savings in 1998 are $197 million. Veterans Affairs/Permanently extend pensions-Medicaid nursing home provi- sions. The Administration proposes to extend permanently the current $90 monthly limit on pension benefits paid to any veteran or survivor without dependents who receives Medicaid coverage in a Medicaid-approved nursing home. This proposal would reduce an indirect federal subsidy from veterans programs to state Medicaid programs. There are no savings in the 1994-97 period. Savings in 1998 would be $300 million. Veterans Affairs/Service members’ contributions to the Montgomery GI Bill Education Program. The Montgomery GI Bill program provides monthly benefit payments to eligible service members and veterans who are enrolled in a post-secondary education program. To become eligible, military personnel agree to contribute to the program through a reduction in their basic pay during their first year of service. In two steps over the last three years, Congress has increased the monthly benefits by 33 percent without increasing individuals’ payroll contributions to the program. Before the increases in benefits, the program funding match was 9:1 (government:service members). This proposal would prospectively increase their contributions to restore the 9:1 match. Estimated savings are $339 million over four years, including $98 million in 1997. Systemwide health care reform is a top Administration priority, but some additional short-term savings proposals, focusing on providers rather than beneficiaries, make immediate sense. Medicare: HHS/10 percent capital reduction, inpatient. The proposal would extend current law beyond 1995. Hospitals receive payments for Medicare’s share of capital expansions and improvements of both inpatient and outpatient department (OPD) facilities. The current payment level was reduced in OBRA 90 by 10 percentage points to 90 percent of Medicare’s share of capital costs in every year. Estimated savings: over four years—$680 million; 1997—$380 million. HHS/10 percent capital reduction, OPD. The proposal would extend current law beyond 1995. Hospitals receive payments for Medicare’s share of capital expansions and improvements of both inpatient and outpatient department (OPD) facilities. The current payment level was reduced in OBRA 90 by 10 percentage points to 90 percent of Medicare’s share of capital costs in every year. Estimated savings: over four years—$260 million; 1997—$150 million.
    SD SS EE EDIE EE OIE A EAE 8 EEE TO I ET I IE EE EC ETE TBE IIR IT BE GORI FE a EE Sf HHS/Maintain calendar year 1995 ratio of premium collections to program outlays with a 27 percent ceiling. Under this proposal, beginning in January, 1996, the monthly Part B premium would be set to maintain the percentage of program costs covered by premium collections in the previous year, but with a ceiling of 27 percent. The monthly Part B premium amount currently is set in law through the end of calendar year 1995 ($36.60 in CY93, $41.10 in CY94, $46.10 in CY95), and premium collections are projected to cover about 27.5 percent of program costs in 1995. When originally established, SMI premiums were intended to cover 50 percent of program costs. They eroded significantly over the years, however, and TEFRA 1982 established a temporary 25 percent premium floor, beginning in 1984. Congress extended the floor twice, and OBRA90 set fixed premium amounts in law through 1995 at levels then estimated to be approximately 25 percent of program costs. Beginning in 1996, calculation of the premium is scheduled to increase by the lower of the OASI COLA adjustment to the previous year’s premium, or to be set at 50 percent of program costs. Estimated savings: over four years—$5 billion; 1997—$3.9 billion. HHS/Eliminate add-on payment for hospital-based HHAs. This proposal would eliminate the separate add-on payment that hospital-based home health agencies (HHAs) receive in addition to payment under the Medicare cost limits. Eliminating the add-on would create a level playing field on which all home health agencies can compete. Estimated savings: over four years—$840 million; 1997—$250 million. HHS/Eliminate skilled nursing facility return on equity payments. The proposal would eliminate the Medicare payment policy that pays proprietary skilled nursing facilities (SNFs) a return on equity (ROE) invested in the SNF. Medicare should pay for services rendered to beneficiaries; it should not subsidize private investment. Estimated savings: over four years—$560 million; 1997—$160 million. HHS/Lower IME to 5.65 percent. This proposal would gradually lower the Medicare indirect medical education (IME) from 7.7 percent to 5.65 percent for each .1 increase in the intern and resident to be a ratio (IRB ratio). Teaching hospitals currently receive an additional 7.7 percent payment to the Medicare DRG payment for each .1 increase in their IRB ratio, above their base year levels. The adjustment is intended to compensate these hospitals for the higher costs of delivering care incurred by inexperienced residents. In addition, teaching hospitals tend to have sicker case mixes than non-teaching hospitals. The General Accounting Office (GAO) and the Prospective Payment Assessment Commission (ProPAC) have both found that the 7.7 percent adjustment overcompensates teaching hospitals for these costs and have recommended that the adjustment be reduced. ProPAC has recommended setting the adjustment at 5.4 percent. Lowering the IME adjustment would also encourage teaching hospitals to instill within their residents more cost-effective patterns of care at an 2
     early stage in the residency. Estimated savings: over four years—$1.94 billion; 1997—$1.4 billion. HHS/Permanently extend 2 percent laboratory fee update. This proposal would extend the 2 percent annual update of Medicare reimbursement rates for clinical laboratory services. OBRA 90 established a 2 percent update through the end of 1993, after which laboratory fees would be updated by the urban component of the Consumer Price Index (CPI-U), approximately 3.5 percent annually. There is no evidence, however, to indicate that laboratory costs are increasing by the rate of inflation. Medicare payments to laboratories should more closely reflect decreasing costs due to technological advances, such as increased automation, and changes in the market, such as lower-cost equipment. Medicare payments to laboratories are already excessive. An OIG study found that Medicare paid laboratories 90 percent more than physicians paid for the same tests. Moreover, a GAO study indicated that laboratories use higher profits from Medicare to subsidize discounts to other, private payers. Estimated savings: over four years—$740 million; 1997—$380 million. HHS/Provide incentive to encourage submission of claims via electronic format. In total, Medicare Part B outlays were projected to be $59.8 billion in 1993. The proposal would save 0.1 percent of the 1994-98 Medicare Part B baseline. The proposal would encourage physicians and other Part B providers to submit claims via the more administratively efficient electronic format by charging physicians and other providers $1 for each paper claim filed. The proposal would not take effect until January 1, 1996, to give providers lead time to adjust their filing systems. Estimated savings: over four years—$265 million; 1997—$175 million. HHS/Medicare Secondary Payer (MSP) reforms. The MSP requirements currently vary depending upon the category of enrollee. This proposal would create a consistent MSP threshold for the aged, disabled, and end stage renal disease (ESRD) patients—all employers of 20 or more would be primary payers. Current law already requires that Medicare enrollees with employer-based health insurance use their private health insurance before drawing upon their Medicare policies. This applies more consistent standards and more efficient enforcement of these provisions to save Medicare costs. Estimated savings are $947 million for 1994 through 1997; and $305 million in 1997. HHS/Permanently extend reduction of payments’ for hospital outpatient services by 5.8 percent. OBRA 1990 reduced Medicare reimbursement for hospital outpatient department (OPD) reasonable costs by 5.8 percent through 1995. This proposal would extend that provision permanently. Depending on the service, OPDs are paid based upon varying formulas, some of which take into account the OPDs’ reasonable costs. The overall reduction to OPDs would be much less than 5.8 percent, because less than half of Medicare reimbursement is based on reasonable costs. Because hospital inpatient reimbursement rates are constrainéd by DRGs, hospitals have shifted services and costs to the outpatient setting. As a result, outpatient services are one of the fastest growing
     components of the Medicare program, rising by an average of 17 percent per year in the 1980s. Legislators approved a 5.8 percent reduction in OBRA 1990 in an attempt to counter this rapid growth. If this provision is allowed to expire, outpatient costs, which continue to grow in the double-digits, will start growing even faster. Support for this proposal is well-established through previously approved legislation. Estimated savings are $950 million for 1994 through 1997; and $525 million in 1997. HHS/Reduce hospital outpatient department reimbursement by an additional 4.2 percent. In total, Medicare Part B outlays were projected to be $59.8 billion in 1993. The proposal would save 0.5 percent of the 1994-98 outpatient services base. Currently, Medicare reimbursement for outpatient services is based in part on the OPD’s reasonable costs minus 5.8 percent, while reimbursement for outpatient capital costs is reduced by 10 percent. This proposal would reduce reimbursement for OPD services by an additional 4.2 percent beginning in 1996, to a 10 percent reduction. This would make payment for both categories consistent by reimbursing both at 90 percent of costs. Estimated savings: over four years—$690 million; 1997—$375 million. HHS/Ban physician self-referrals. A Physicians may not refer a Medicare or Medicaid patient to a clinical laboratory in which the physician or the physician’s relatives have a financial interest. Several exceptions are specified in statute. This proposal would extend ownership and referral prohibitions to additional services, such as physical and occupational therapy, durable medical equipment, and parenteral/enteral nutrition equipment and supplies. Estimated savings: over four years—$250 million; 1997—-$100 million. HHS/Set EPO at non-U.S. market rates. The proposal would reduce the amount Medicare pays for erythropoietin (EPO) from $11 per 1,000 units to $10 per 1,000 units. EPO is the drug used by patients suffering from kidney failure, to counter anemia by increasing the body’s production of red blood cells. Medicare is virtually the sole purchaser of EPO and should exercise its market power to pay reasonable costs while maintaining access for all Medicare beneficiaries. Estimated 1997 savings are $50 million. Estimated savings 1994-1997—$160 million; savings for 1994-1998—$210 million. HHS/Resource-based practice expense phase-in. This proposal is an interim step toward a resource-based system for practice expenses. It would reduce practice expenses in relation to the relative value work units by one-half of the difference between practice expense and physician work relative value units, rent no lower than 110 percent. Phase-in to a resource-based system for practice or overvalued expenses under the physician fee schedule would begin in 1997. The recently implemented physician payment reform system divided payment into three distinct components—overhead, work, and malpractice expenses. The work component is based on an extensively-researched relative value system, developed in 1991. The existing practice expense component is based upon an obsolete fee schedule and bears no relationship to the reformed work component of the fee schedule. This proposal would only reduce the practice component in