Last January the patient share of the cost for the first 60 days of hospitalization under Medicare went up 23 percent, from $400 to $492. Next January, if Congress does not intervene, it will go up another 16 percent, to $572. Cost increases under Medicare are supposed to be subsiding. But the patient share of these costs, the so-called Medicare deductible, is soaring instead.
The difficulty lies in an indexing mechanism that made the best of sense when Congress put it in the law. It has been overtaken. Deductibles were intended partly to distribute costs and partly to give patients an incentive to avoid unnecessary hospitalization and keep costs down. Thus in Medicare it was decided that the patient would pay the first day; then the government would take over. To simplify administration, every patient pays an average cost; the deductible each year reflects the average daily cost to Medicare of hospitalization in years just past.
The problem is that, as the government has tightened up in paying hospitals, the hospitals have responded in part (as it was hoped they would) by reducing lengths of stay. The fixed costs involved in any stay are thus spread over fewer days. By restraining costs per stay the government has increased costs per day. The deductible turns out to be based on the wrong measure, with badly skewed results.
Sens. Edward Kennedy and John Heinz tried to fix this in the Senate budget resolution for next fiscal year. Their proposal was to have the deductible rise each year by the same percentage as costs per stay, which would lift it to only $520 next year. The government would have a greater share of costs to pay than under current law. The senators proposed that the Finance Committee be instructed to raise taxes to pay for that. The Senate wanted neither to offend the elderly nor to vote for a specific tax increase, so Finance Committee leaders took it off the hook by promising to keep down the deductible in separate legislation later in the year. They didn't say how they would pay the cost.
The House was more direct. It raised its estimate of Medicare costs by about $1 billion for the next three years. Its budget resolution assumes a deductible next year of no more than $540.
The budget conferees deal only in spending totals; they cannot command a particular change in the law. But they should be as explicit as they can in leaving room for this change. If it adds to the pressure for a greater tax increase than the president wants -- well, we see no harm in that. You have here an altogether unintended result, a classic case of government by gremlin, and Congress ought to get the little fellow out of there.