The New York Times - December 14, 1985
Robert Pear

Doctors' fees under Medicare, the health insurance program for 30 million elderly and disabled people, have been frozen since July 1984. The new proposal, for the fiscal year that starts next Oct. 1, would for the first time reduce Medicare payments to physicians for services the Government labels overpriced.

In addition, according to budget documents and Administration officials, the Office of Management and Budget is proposing an across-the-board reduction in the maximum fees that Medicare pays to physicians for various services.

'Flaw' in Computing Costs

The Government says it has discovered that for the last decade, the Medicare Economic Index, used to make annual adjustments in doctors' fees, has overstated the doctors' cost of doing business. The index will be recomputed to correct this "technical flaw," one of the documents says.

The proposals have been tentatively approved by Mr. Reagan as part of a package of spending cuts designed to reduce the Federal deficit to levels specified by a new law seeking to balance the budget by 1991. In theory, Cabinet officers may challenge the budget proposals, but at a Cabinet meeting on Thursday, Mr. Reagan discouraged such appeals.

Medicare is run by the Department of Health and Human Services, whose new Secretary, Dr. Otis R. Bowen, was sworn in Friday. Appeals must be filed in writing by 9 A.M. Monday with James C. Miller 3d, director of the budget office.

Other Health Proposals

Some of the other proposals in the draft budget for the Department of Health and Human Services are these:

* The premium people must pay for Medicare coverage of doctors' bills would increase from the current $15.50 a month. The premium now covers 25 percent of costs in this portion of the Medicare program. The Administration would increase the premiums to cover 35 percent of program costs for elderly people who pay their own premiums, and 50 percent for those whose premiums are paid by their employers. The budget does not give the premium levels expected.

* The Medicare deductible for physician services, now $75, would be increased to $100 and would rise each year with inflation. Beneficiaries must pay the deductible before Medicare starts paying.

* The National Institutes of Health would reduce Federal grants for biomedical research to 18,000 in 1987, from 18,700 in 1986. The grants provide an average of $140,000 to $150,000 a year.

* Medicare would limit the number of cataract operations and surgical implantations of plastic lenses that could be reimbursed. Details are not given.

Cut in AIDS Treatment

The proposal on AIDS, acquired immune deficiency syndrome, calls for canceling a portion of 1986 spending, cutting the $238 million just appropriated by Congress to $190 million. The proposal calls for spending $190 million in 1987 as well.

Congress has consistently provided more money for AIDS than the Administration sought. The proposed $48 million cut would not directly affect biomedical research but could affect patients' treatment, officials said. The money would come from demonstration projects that finance blood testing, telephone hot lines and hospices and home health care for AIDS patients.

Medicare cost $71.4 billion in the fiscal year that ended Sept. 30. The proposed changes in payments to physicians would save $340 million in 1987, the budget office estimated.

The budget also proposes many steps to cut back on a perceived overuse of home health services under Medicare, including instituting a charge of about $5 for each visit to a beneficiary's home by a health worker. Medicare officials would develop a system to identify heavy users of the program, such as "beneficiaries receiving more than 100 visits in a calendar year" or "physicians who order daily visits" for periods found to be excessive.

Possible Increase for Hospitals

The budget holds out the prospect that hospitals might get an increase of up to 2 percent in Medicare payments in 1987, but not the 6.6 percent increase that growing costs might warrant. An increase of only 2 percent would save $850 million for the hospital insurance trust fund in 1987, documents show. For the current fiscal year, 1986, hospital reimbursement is frozen at the 1985 levels. However, the draft observes, the Secretary of Health and Human Services, who sets the rates, could provide an increase of up to 2 percent if that seems justified.

The draft budget says "legislation will be proposed to amend the tax code to require employers to provide health insurance coverage for disabled spouses and dependents" and for spouses over 69 years old. Medicare would pay only those costs not covered by private insurance. Budget officials estimate that this change would save $600 million in 1987.

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