The Reagan administration will ask Congress for a one-year freeze in the Medicare payment rates for hospitals and doctors, with no allowance for inflation, as part of its plan to cut domestic spending in fiscal 1986, sources said yesterday.
Earlier, the administration, in documents sent to Capitol Hill, had projected a freeze on payments to doctors but had tentatively planned to permit an inflation-adjusted increase in the rates hospitals receive for treating Medicare patients.
Now, however, the administration has decided to freeze hospital as well as doctor rates.
Overall, the Medicare proposals are projected to reduce program outlays by about $3 billion in fiscal 1986 and possibly as much as $19 billion to $20 billion over the fiscal years 1986 to 1988 -- the largest single domestic program cut in the budget.
The budget also is expected to propose an increase in Medicare patients' monthly premiums for the doctor-insurance portion of the program; an increase in the $75-per-year deductible that Medicare patients must pay under the doctor-insurance program before Medicare begins picking up the bill, and a reduction of subsidies to teaching hospitals.
However, a major change in the way Medicare reimburses hospitals for capital investments -- which would have limited payments for expansion -- probably will not be included in the budget, sources said, but will be proposed later in the year.
Here are the major changes expected to be proposed by President Reagan:
* The rates Medicare pays hospitals for each patient admitted would be frozen at current levels for fiscal 1986 instead of being increased to cover inflation.
In fiscal 1987 and 1988, they would be allowed to rise to keep pace with the inflation rate for the so-called medical market basket, a package of items that hospitals buy. The market basket increase usually runs higher than overall inflation in the economy. Projected fiscal 1986 savings: $2.03 billion.
Under the new prospective payment system for Medicare voted by Congress in 1983, hospitals are no longer paid on a per-day basis for the care of Medicare patients. Instead, the government sets fixed rates in advance for each different type of illness, covering the entire stay.
The hospital does not receive anything extra if the patient is kept in the hospital longer, so there is no incentive to pile on extra days or unneeded tests that would increase Medicare payments.
Under Medicare, the hospital must accept the government payment as its full payment, although when the patient receives something extra that Medicare does not cover -- for instance, a private room, instead of semiprivate -- the patient may be billed separately.
* Rates paid to doctors for various Medicare services would also be frozen at current levels without any inflation increase. This would be the second such freeze; Congress has already voted a freeze for the 15 months starting July 1, 1984. Projected fiscal 1986 savings: $600 million.
* he so-called "indirect" special Medicare allowance to teaching hospitals -- where interns, residents and other training personnel participate in teaching programs while performing hospital services as well -- would be cut by 50 percent from the maximum rate, perhaps in fiscal 1986 or perhaps over the next three years. In the indirect allowance, a hospital gets a higher rate of reimbursement if it has a large number of trainees. Projected fiscal 1986 savings for a three-year phase-in: $250 million.
* The monthly premium paid by Medicare participants for the doctor-insurance part of the program, "Part B," would be increased in steps over four years from 25 percent of the cost of Part B to 35 percent. Under existing law, the premium will be $15.50 a month in 1985. Projected fiscal 1986 savings: $375 million.
* The current $75 Part B deductible, the amount a Medicare patient must pay out of pocket each year before Medicare starts paying for doctor costs, would be kept at $75 for one year and then would rise automatically annually to keep pace with inflation.
Medicare is by far the nation's largest medical program, with estimated outlays of $68 billion in fiscal 1985 for the care of 30 million aged and disabled Social Security beneficiaries.
For years its costs have been rising far more rapidly than inflation; its hospital trust fund is expected to become insolvent sometime in the 1990s.