In the first test of President Reagan's proposal to restructure the way the government pays medical bills, a House Ways and Means subcommittee yesterday approved fixing payments in advance for various hospital services under Medicare.
Health subcommittee Chairman Andrew Jacobs Jr. (D-Ind.) told reporters the prospective payment proposal, which won bipartisan and apparently unanimous approval on a voice vote after adoption of several major amendments, would eliminate "cost-plus" reimbursement in Medicare's $47 billion hospital insurance program. Jacobs said that would leave "cost plus" as "the exclusive province of the Pentagon."
Instead of reimbursing each hospital for what it cost to treat Medicare patients, the government would set payment levels in advance for 467 different types of illnesses. All hospitals, with certain regional and other variations, would receive the same payment for each Medicare patient in each category.
If a hospital kept costs under the target price it would profit; if it failed, it would lose.
The new system, drafted by the Department of Health and Human Services at the request of Congress, is designed to force hospitals to become more cost conscious in hopes of reducing the inflation rate in the health care field. Hospital costs last year rose at triple the general inflation rate.
Michael Bromberg, executive director of the Federation of American Hospitals, called the plan a "historic change in the way hospitals are paid."
The subcommittee made these major changes in the bill:
* The new system would not apply to hospitals in a state that chose to adopt its own cost control system for all hospitals, provided the cost to the U.S. government for Medicare patients there was no greater than under the prospective payment plan. Six states including Maryland already have cost control systems for both Medicare and non-Medicare patients.
* Instead of a single national rate for each of the 467 categories there would be separate rates for urban areas (usually high cost) and rural.
* The new system would be phased in over two years.
* The prospective payment rate would be based on national average costs in the past for each of the 467 types of illness, updated by increases in the costs of a market basket of hospital goods and services.
* Public hospitals and others treating a large number of low-income and Medicare beneficiaries could get higher payments, and hospitals would be required to use professional review organizations to monitor admission practices and quality of care.