CONGRESS CONTINUES to tune -- and complicate -- the systems for reimbursing hospitals and doctors under Medicare. The giant health insurance program now helps pay the medical bills of a seventh of the population. At an estimated $73 billion this year, it will account for $1 of every $14 the government spends.
Two-thirds of the money goes to hospitals. In 1983, to hold down costs, Congress changed the way the hospitals are paid. Instead of reimbursing them for whatever they could show they spent on Medicare patients, it shifted to a kind of price list -- so much for each kind of illness. As first set up, the new system of averages was both too generous and too crude. Congress has dealt with the first problem by not lifting the price grid as much as the inflation rate the last several years. That has squeezed out some of the initial fat. It has dealt with the second problem by introducing new variables to compensate certain groups of hospitals for special costs. The tighter the basic grid becomes, the more important these refinements.
The twin processes continued in last month's reconciliation bill. As in previous years, the largest domestic spending cuts Congress made were in Medicare. The basic price list was increased less than the likely inflation rate. But not all the savings from this action went to deficit reduction; some were plowed back in the form of new allowances. Thus Congress earlier had created a premium for hospitals serving disproportionate numbers of poor people. This time it also approved premiums for rural and big-city (as opposed to lesser urban) hospitals, and a small new increment for those in high-cost areas.
Up to a point, there is nothing wrong with such knob-twisting. The system is both vast and still quite new; it needs adjusting. It has worked remarkably well to date. Congress is searching for proxies -- rural or big-city, for example -- that will let it keep paying legitimate costs while barring the excessive. The dangers are 1) that it will finally make so many exceptions that the system will become too accommodative again, and 2) that the process of adjustment will become politicized. It got dangerously close to that this year, as the chairmen of the Ways and Means and Finance committees battled respectively for big-city and rural institutions. It's fine to have an old-fashioned formula fight over highway funds; why else are members sent to Congress? But hospital payments are too important to be dealt with this way.
The other third of Medicare money goes mainly to doctors. The doctor payments are among the fastest-growing major items in the budget, but there is less agreement on how to control them. As in other recent years, Congress tried this time to keep doctors from charging more than Medicare deems fair, by docking those who do. The idea is partly that their patients, who must pay the excess, will turn on them. The bill also seeks to correct a perceived imbalance by raising payments more to general practitioners than to specialists. But the broader question of imposing fiscal discipline on the doctors was left to another time. Congress has made good progress with hospitals, but with doctors it has barely begun.