WASHINGTON — In an effort to reduce the government's share of health care costs, the Reagan Administration will undertake a major initiative this year to encourage Medicare recipients to join private health care plans supported by the federal government, Health and Human Services Secretary Otis R. Bowen announced Monday.
In a policy address to private health maintenance organizations, Bowen said the program would "offer people and providers a choice between traditional Medicare, as we all know it, and Medicare delivered through a private health plan," which could offer a broader range of services than those currently provided by the government's health care assistance program for the elderly.
Medicare would make a monthly lump-sum payment to a private plan amounting to 95% of the approximately $200 that the government now pays in benefits each month for the average Medicare recipient, according to officials in the department's Health Care Financing Administration.
After the payment is made, Bowen said, the private plan would then assume "full financial and medical responsibility for the health care of a Medicare beneficiary enrolled in it."
The proposal requires action by Congress, where its fate is uncertain.
"The private health plan would have a lot of freedom under this arrangement," Bowen said. "Within broad limits, it could decide how to organize itself, it could determine how services are to be utilized and how to pay doctors and hospitals."
The proposed program, which would be voluntary for recipients, could save as much as $3.7 billion a year, but only if all 30 million Medicare beneficiaries decided to join private plans, Health Care Financing Administration officials said.
More than 800,000 of Medicare's recipients already participate in a similar program with selected health maintenance organizations, but they are limited solely to those organizations holding contracts with Medicare. HHS officials said the new proposal would give Medicare recipients additional options by allowing them to select the private health care plan of their choice.
'Up to the Beneficiary'
"With the new system, the beneficiary would be dealing with the plans--we wouldn't be," said Duke Sybor, a spokesman for the Health Care Financing Administration. "The government would back away from the physician-patient relationship. The choices would be up to the beneficiary."
But Rep. Henry A. Waxman (D-Los Angeles), chairman of the House Energy and Commerce subcommittee on health, expressed reservations about the proposal.
"There are two major concerns I have about this proposal," he said. "The first is that we not push Medicare patients into fly-by-night operations that will save money by not providing good quality care.
"The second is that the Reagan Administration has long sought a way of putting a limit on what the federal government would provide for Medicare beneficiaries by way of a voucher," a method by which the government would no longer pay directly for services, as it now does under the current Medicare program.
Rather than the government paying providers to deliver services to Medicare beneficiaries, the recipients get fixed-sum vouchers, with which they must deal directly with insurers or health care providers.
"This would leave many Medicare beneficiaries without the ability to come up with the additional out-of-pocket expenses for their care. So we would want to look at it very carefully," Waxman said.
Bowen, a physician, said in his speech that he has "always believed as a physician that the best and final guarantee of quality care is the physician. As long as we can maintain that strong tradition of the doctor who cares first and foremost about (a patient), then I say quality care is in good hands."
He added: "Competition among private health plans extends to the quality of care those plans offer and, in the years to come, consumers will become much more savvy about differences in quality. . . . This means that managed care systems will be competing among themselves for the best providers of care."
The potential advantages of the Administration's proposal include the possibility of more services than Medicare now offers, such as dental or vision care. In addition, private plans might have a lower deductible requirement than Medicare, which now pays 80% of "allowable" doctors' fees. Private organizations might not require participants to pay as much as the 20% balance.
On the other hand, participants would be required to use only those physicians and hospitals that are part of the plan and could not see specialists unless referred by their primary care physicians.
The organization would have an incentive to keep the costs low--if the plan spends less than the amount it receives from Medicare, it will be allowed to keep the difference, HHS officials said. If it spends more, it is responsible for the costs--a system similar to the new Medicare system of reimbursement for specific procedures performed in hospitals, HHS officials said.