Washington President Clinton's fiscal 2000 budget proposal would set aside 15 percent of the 15-year federal budget surplus to extend Medicare's solvency until 2020, but it also would save Medicare $7.7 billion in expenses over five years through further reimbursement cuts to hospitals, nursing homes and other providers.

"I thought we cut them enough in 1997. I'm not for cutting them anymore," said Rep. Bill Thomas, R-Calif., chairman of the Ways and Means subcommittee on health, referring to the 1997 balanced budget law that cut the growth of Medicare by $115 billion over five years.

Clinton's plan would allow people 62 to 65 years old to buy into Medicare and would also make the program available to certain people as young as 55. It would fund the administration's long-term care initiative, including tax credits for caregivers; provide money to educate Medicare beneficiaries about long-term care options; and give states greater flexibility to offer Medicaid home care coverage as an alternative to nursing homes.

The proposal, however, would trim expenses by not updating hospital payment rates for 2000. It also would reduce from 55 to 45 the percentage that Medicare pays hospitals for bad debt and it would extend this policy to providers beyond hospitals. In addition, it would limit Medicare payments for orthotics and prosthetics to the national median.

In his January State of the Union speech, Clinton revealed that the Justice Department was preparing litigation against tobacco companies to recoup "hundreds of billions of dollars" that Medicare and other insurance programs paid to treat smoking-related illnesses. The recovered funds would be earmarked to strengthen Medicare, the president said.

Not detailed in the speech, but part of Clinton's overall budget proposal, is a $2 billion initiative that removes significant barriers for people with disabilities to work. The Work Incentives Improvement Act would provide workers with disabilities the option to buy into Medicaid and Medicare, and would increase assistive technologies that make it possible for disabled people to work.

Separately, a special commission charged with recommending ways to overhaul Medicare canceled a February meeting after most panel Democrats criticized its work thus far. The 17-member commission was scheduled to report to Congress by March 1 on recommendations for preparing the program financially for a flood of retiring baby boomers after 2010.

"We are concerned that the working document does not seem to reflect all of the Democratic principles we had agreed upon to guide us in considering Medicare commission recommendations," the Democrats said in a letter to commission cochairman Sen. John Breaux, D-La.

Although the president's proposal could pump up Medicare coffers by as much as $700 billion, Breaux and other commissioners said major reform is still needed. Breaux favors a plan to shift Medicare from a bill-payer plan to a system that helps the elderly and people with disabilities buy health insurance. Termed the "premium support" system, it proposes that Medicare pay a fixed share of beneficiaries' premiums and negotiate premiums with health plans.

Advocates of Breaux's proposal say Medicare would save money and patients would have more choice as managed care organizations compete to provide services. However, some commission members contend that patients would not be guaranteed a core set of services and could pay more in medical bills.

While it appears a majority of the Medicare panel supports the proposed restructuring, several members said they need more details or additional elements before they would vote for it. Commissioners Stuart Altman, a Brandeis University professor, and Laura Tyson, a University of California economist, are working to add a prescription drug benefit to the plan.

Commissioner Bruce Vladeck, former head of the Health Care Financing Administration, strongly opposes Breaux's approach. Currently, "you are entitled by law to a very specified package of benefits," Vladeck said. "That is an entitlement this proposal takes away."