The General Accounting Office said it has found merit in about 80 percent of the Grace commission's cost-cutting recommendations, but said that much of their projected savings is overstated and amounts to sweeping policy changes, not improved management.
In a report released this week, the GAO said it "questions the accuracy" of much of the $424 billion in federal budget savings that the commission contends could be achieved. The savings are based on 2,478 recommendations by the President's Private Sector Survey on Cost Control, headed by industrialist J. Peter Grace.
The GAO said that $88 billion of the savings would come from changes in federal subsidy programs and restrictions on Medicare and Medicaid payments, and $58 billion would be saved by cutting civil service and military retirement benefits.
While these may be good suggestions, the GAO said, they are controversial new policies that would have to be debated by Congress. President Reagan frequently has described the 47-volume report as a plan to make government more efficient.
The political obstacles were underscored last summer when the Grace commission urged that the government increase its charges for hydroelectric power it sells in the West. But the Senate voted 64 to 34 to continue for 30 years the subsidized power generated by the Hoover Dam, which is sold for as little as one-tenth of market rates.
As for the panel's suggestion that the Coast Guard charge boaters for some of its services, the GAO said it had been making that recommendation since 1955, but that Congress never adopted it.
In the report, requested by Sen. William V. Roth Jr. (R-Del.), the GAO said that most of the Grace recommendations "have overall merit" and that "a good number . . . have already been implemented."
"In general," it said, "GAO supports the commission's management improvement issues more frequently than the policy-oriented issues. However, the policy-oriented issues make up a large portion of the commision's total estimated savings."
The auditors said the commission's method of projecting savings was flawed, mainly in its estimates of the rates of inflation in the future.
The auditors questioned the commission's plan to save nearly $30 billion by limiting federal health care costs to predetermined increases, and by allocating Medicare and Medicaid funds to geographic areas, based on population. They said the result could be "reductions in service quality," "lower levels of health care" and "shifting costs to beneficiaries."
Similarly, the auditors said the commission had underestimated the growing demand for Veterans Administration hospital care in recommending that fewer facilities be built.
The GAO questioned another Grace proposal to count noncash benefits in determining poverty, such as weighing the value of school lunch aid before a family is deemed eligible for food stamps.
"Many means-tested programs were not designed to close the poverty gap and are not limited to the poor," the report said. " . . . For example, Medicaid, the largest means-tested program, pays for services to meet health needs that otherwise would be unmet."
Other Grace commission suggestions that would require policy changes include reducing or eliminating farm subsidies, shifting enforcement of pollution control laws to the states, and repealing or modifying wage laws for workers on federal projects.
The GAO agreed with the commission that civil service and military pensions are "much more costly and generous" than private retirement plans, but questioned some of the proposed changes, such as saving $7.5 billion by limiting sick leave and annual leave.
On the other hand, the GAO generally praised the panel's suggestions for improving debt collection, data processing, procurement, cash management and sales of unneeded property.