A four-member Cabinet group has tentatively approved a plan for reducing medical inflation by revising the way the nation pays its health care costs, now nearly 10 percent of gross national product, government sources said yesterday.
The long-awaited four-part plan is still not in final form and could be changed before being sent on to President Reagan, who will decide whether to include it in his fiscal year 1984 budget.
Its main feature is that it would shift costs from the government to patients or hospitals. The aim is to make both more "cost conscious" and thereby discourage excessive use of services and hospital inefficiencies, which drive up costs.
One source said the plan also could save the government in the neighborhood of $2 billion a year initially in medical costs or tax losses on health insurance. Sources said basic outlines of the plan had been tentatively agreed to by Office of Management and Budget Director David A. Stockman, Secretary of the Treasury Donald T. Regan, Secretary of Health and Human Services Richard S. Schweiker and Council of Economic Advisers Chairman Martin Feldstein.
One part of the plan would raise substantially the amount Medicare patients must pay for routine hospital care, but then add a "catastrophic insurance" feature to Medicare guaranteeing that once out-of-pocket costs reached a fixed amount, say $2,500 a year, the patient would have to pay nothing more.
A second would allow Medicare patients to opt out of Medicare and obtain government vouchers instead to buy private health insurance. The vouchers, according to one source, would be worth 95 percent of the insurance value of Medicare coverage. The idea is to encourage private insurors to compete by providing more services for less cost.
A third feature would be a prospective payment plan, developed by HHS, for hospitals participating in Medicare. At present, such hospitals are reimbursed for all reasonable costs incurred. Under a prospective payment plan, the government would fix in advance the amount it would pay hospitals for treating Medicare patients and if the hospital's costs went over, it would suffer financially.
The fourth part of the plan would make workers pay income taxes on health insurance premiums paid by employers when these exceeded a specified figure, probably $2,400 a year. Sources said the Cabinet group is not fully agreed on this proposal and conceivably could reverse its position. If taxes were collected on premiums over $2,400, Treasury would collect an extra $1.6 billion a year.