Washington President Clinton released a Medicare reform proposal that included a limited prescription drug benefit for all Medicare recipients yet would save $72 billion over 10 years, in large part through mechanisms such as expanded competitive bidding for health care providers.

The proposal would authorize competitive bidding and price negotiations to set payment rates for Part B items and services. The Health Care Financing Administration would have the authority to select the items and services, and the geographic areas, to be included in a bidding or negotiation process based on the availability of providers and the potential to achieve savings. Protections would be built in for rural areas where competition might be difficult.

"Competitive pricing is now being tested through Medicare demonstrations and appears to be successful at constraining costs," states Clinton's plan, referring specifically to the current home medical equipment demonstration in Polk County, Fla.

"The series of authorities in this package would allow for broader use of such arrangements that both assure a clear, fair process for providers as well as federal savings and improved care for beneficiaries."

Clinton's proposal also provides some relief to home health agencies hit hard by the Balanced Budget Act of 1997. Specifically, repayment of overpayments related to the interim payment system would be increased from one year to three years; the surety bond requirement would be postponed until October 2000; and the surety bond limit would be $50,000.

The plan, which the administration predicts would extend Medicare's solvency to 2027, was not greeted warmly on Capitol Hill, where issues such as Social Security reform and tax cuts are expected by analysts to take precedence. The battle over Medicare is expected to be part of a larger fight over how to spend the $3.7 trillion budget surplus anticipated over the next 15 years. Republicans want to provide the drug benefit to only lower-income beneficiaries who don't qualify for Medicaid.

Clinton wants to use some of that surplus to shore up Medicare. Aides say his proposed program would be good for seniors on Medicare who currently pay about $600 a year for prescription medication. Under the plan, they would pay between $24 and $44 a month and the government would reimburse them up to $2,500 a year for prescriptions.

Earlier this year, a bipartisan commission concluded that offering a prescription drug package to all Medicare beneficiaries was too expensive for an entitlement program already projected to be bankrupt by 2015. The commission contemplated offering a fixed amount of money to each beneficiary to purchase a public or private health plan.

The president's package would not impose federal controls on drug prices, but instead it would require the hiring of private companies to manage distribution and control costs by obtaining discounts from drug manufacturers and by preventing overuse of prescription drugs.

Clinton's plan also would encourage price competition among HMOs for the right to enroll Medicare beneficiaries. -K.G.