As part of its efforts to cut both regulations and the federal budget, the Reagan administration is moving to dismantle one of the government's few existing programs to combat inflation in health care costs.
The program is the health planning system enacted by Congress in 1974, under which state and local "health systems agencies" (HSAs) have been created to issue certificates of need before new hospitals can be built or costly kinds of medical equipment bought. The idea is to prevent duplication and excess investment.
President Reagan's budget director, David A. Stockman, wants to cut off the $165 million a year now spent on HSAs, on grounds that the system represents an unwarranted federal intrusion in local decision-making and interferes with "market forces" in the health business.
In its place, Stockman says in his now-famous "black book" of proposed budget cuts, the Republicans will help create a new "competitive" health care system in which prices will be held down in a more traditional way as insurance companies, group health associations and other medical providers battle each other for business. But so far this competitive system is only an idea.
HSAs are one of several cost-limiting devices that have been put in place over the years, without fanfare, and often at the instigation conservatives alarmed by the snow-balling national medical bill and the federal share of it, now 30 percent.
Together these devices, enacted by Congress over the past decade or so, constitute an unpublicized system of partial price controls in this sector of the economy that new consumes $1 of every $11 spent by Americans.
Conservatives in the House, including Stockman, cited these devices with approval two years ago in defeating the Carter administration's hospital cost containment bill; they said the government already had cost-containment programs in place. In the Senate, Pennsylvania's Richard Schweiker, now Reagan's secretary of health and human services, supported HSAs.
The existing federal cost-containment system has four major components:
Detailed reimbursement rules, mounting to hundreds of pages, to control how much is paid doctors, hospitals, nursing homes and other providers for services under the Medicare progarm for the elderly, which will cost the federal government $57 billion in fiscal 1982, and Medicaid for the poor, which now costs the federal government $18 billion a year and the states $16 billion.
Federal encouragement, under several provisions of the 1974 health planning law, to those states such as Maryland, New York and Massachusetts that regulate hospital costs.
HSAs, set up to deal with the fact that many communities have too many hospital beds yet continue to build, while others have duplicate services as each hospital tries to be the equal of all others.
Professional Standards Review Organizations (PSROs), set up throughout the country under a 1972 law. Here, too, the federal government is seeking to control costs indirectly, through local committees of doctors charged with reviewing medical practices and making sure the least costly, consistent with highest quality care, are used on Medicare and Medicaid patients.
There is some evidence that the Reagan administration is unhappy not only with the HSA health planning system but also with the PSRO network, which now costs the government about $160 million a year. The cost-effectiveness of both is in dispute.
Yet, ironically, it was conservatives themselves who pressed for creation of some of these programs to ward off what they feared would otherwise be much greater and more direct regulation by federal bureaucrats.
Thus, in 1970 and 1972, it was arch-conservative Sen. Wallace F. Bennett (R-Utah) who pushed through the PSRO system, warning that if doctors didn't agree to set up committees to review each other -- peer review, it was called -- the government would step in and do it. The Finance Committee "overwhelmingly voted approval of the PSRO amendment as the basic approach to bringing about effective medical -- and not governmental -- control of Medicare and Medicaid," declared Bennett in 1970. "The alternative to use of PSROs is beefed-up review by governmental employes and insurance company personnel."
In 1974, then-senator Schwieker, whose department has jurisdiction over HSAs, Medicaid and Medicare and PSROs, voted for the HSA heath plannng bill, and he backed its renewal in 1979.
In 1979, when the House, at the urging of then-representative Stockman and others, killed Carter's hospital cost-control bill on grounds it would be a bureaucratic nightmare, many conservatives including Stockman himself argured that a system of federal control already existed.
Thus, James T. Broyhill (R-N.C.) told the House: "Mandatory controls, that is, increased regulation, are not necessary to prevent duplication and overlapping of hospital services. A system including health planning agencies and PSROs is already in place for that purpose."
And Stockman himself told the House that by defeating the Carter bill, "we are saying . . . . that we do not have an immediate crisis, that we have some control mechanisms in the field already -- the voluntary effort and the health planning process."
That indeed is what Stockman said when he was trying to convince fellow members to oppose the Carter bill. But now he has changed hats.