A FIFTH OF the spending cuts the administration would make to send the deficit into decline this year are in the two main government health programs, Medicare for the elderly and disabled, Medicaid for the poor. These are tempting targets. Neither existed 20 years ago; now they are a tenth of the budget. Who doesn't think doctor and hospital bills are too high?
But the cuts the president proposes go too far. Much of their burden would fall on the poor; they might also harm some hospitals, already squeezed by the new federal fee system set up in 1983. The administration and Congress have comforted themselves in the past with the view that they could cut payments to hospitals and doctors without affecting patients or care. But that can only last so long. One of the problems for Congress this year will be to decide, without good evidence, the extent to which further cuts might jeopardize care.
The budget documents project that Medicare costs will be $115.4 billion by 1991 if the program is left to itself, and the federal share of Medicaid will be $35.1 billion. The president would reduce both by about a seventh. Of $17 billion in Medicare cost-cutting, more than $7 billion would come from patients in higher premiums and deductibles for the Part B insurance that helps cover doctor bills. Poor and rich would both be charged more. The budget documents say the poor would have their premiums paid by Medicaid. But only about a third of the elderly poor are covered by Medicaid, and Medicaid would also be cut. A better way would be to assign a value to the federal share of Part B insurance and have recipients count this as income on their tax returns. Then the better-off would pay in the form of higher taxes, but the poor would not.
Mr. Reagan would raise another $4.6 billion by limiting payments to hospitals for ther so-called capital costs -- the often considerable costs of modernization and expansion. Hospitals used to fold these costs in with all others, and Medicare patients were billed for their share. Now, in part as a discipline, it has been agreed to put institutions on what amount to expansion allowances instead. The questions are how large to make these and how fast to shift to the new system. That leads to the nearly unanswerable question: Do hospitals have cushions enough under the current reimbursement rules to absorb further cuts? They say no, but some others think yes. Congress needs to proceed with great care on this issue.
The president would also cut Medicaid payments to the states next year, index them thereafter. Currently the government simply pays its share of whatever programs the states provide. These are already smaller than they ought to be; less than half of all poor people now receive Medicaid. This largest of all welfare programs was already cut in the first Reagan term. It would be a terrible social mistake to cut it again.