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Medicare Savings Not Enough To Fund Clinton's Health Plan

By Robert A. Rosenblatt and Dwight Morris
Los Angeles Times

President Clinton proclaims it as his crusade for 1994: to guarantee that every American, sick or well, working or jobless, will be insured against the ravaging costs of health care. And he says he can pay for a hefty share of it by slicing $118 billion from Medicare spending over the next five years.

But Medicare itself is out of financial control, headed for bankruptcy within seven years unless it is radically reformed, the system's trustees warned in a gloomy report last month.

A special Los Angeles Times investigation, which largely supports the trustees' report, demonstrates the dangers facing Clinton if he tries to rely on Medicare to pay for his vision of universal health care coverage.

Spurred by breathtaking advances in medical technology and consumer demand for state-of-the-art care, Medicare outlays have exploded at an average rate of 15 percent a year since the program went into effect in 1966. Runaway spending has made a mockery of cost-control efforts by Democratic and Republican administrations alike.

"We have real questions whether it is possible to reduce Medicare spending by $118 billion without seriously hollowing out the program and almost leaving it as a shell," said Martha McSteen, president of the National Committee to Preserve Social Security and Medicare, a lobby of 6 million senior citizens.

More than that, Medicare's own financial history casts doubt on the administration's prediction that universal health care coverage would be only a modest burden on the Treasury. Medicare, which began with outlays of $3.4 billion in 1966, exploded to $147.7 billion in fiscal 1993, a nearly tenfold increase even after adjustment for general consumer inflation.

That makes Medicare bigger than all federal spending programs except defense and Social Security.

In 1983, in an effort to prevent hospitals and doctors from seeking unlimited Medicare reimbursements, Congress imposed a system of fixed payments depending on the diagnosis. This slowed the growth of spending somewhat, but many surgeries were shifted from hospitals to outpatient clinics, where they were not covered by fixed fees.

Congress also tried to slow spending on doctors by freezing their fees, but the medical profession responded by increasing the volume of required office visits and procedures.

Medicare is clearly a victim of its own success. It has brought an unlimited range of doctors and hospital treatments to 32 million Americans over the age of 65 and 4 million disabled people of all ages.

Thanks in no small measure to Medicare's inception in 1966, the elderly's share of the total population has mounted from 9.5 percent then to 12.6 percent now.

But population growth accounts for only a fraction of the 15 percent annual growth rate in Medicare spending since 1966. To explain the rest, most experts point to massive leaps in medical technology and to the demand by patients and their families for the latest array of tests and operations regardless of cost - after all, the taxpayers pick up most of the tab.

About 800 out of every 1,000 people enrolled in Medicare received some services in 1992, an increase from 633 just a decade ago. And even after adjusting for inflation, the amount spent on each beneficiary rose from an average of $2,216 in 1985 to $3,624 in 1992, according to a commission created by Congress to study Medicare.

The volume of hospital diagnostic tests under Medicare mushroomed from 2 million in 1980 to more than 8 million last year. The sophistication of treatment is sending costs out of sight.

"The real driving force is what we broadly call technology," said William P. Pierskalla, dean of the University of California, Los Angeles' Graduate School of Management. "You have to train people to use the machines, a whole new group of technicians and specialists.

"I'm very pessimistic that we can control costs with this system," Pierskalla said. "The demand for health care is almost insatiable."