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Rivals continue to pick apart Dean's record

Letter from governor's archives cited as flip-flop on Medicare

Howard Dean has cited his support for a 1997 federal law curbing Medicare costs in an effort to fend off attacks from his rivals for the Democratic presidential nomination, but correspondence obtained under the Freedom of Information Act shows that Dean, as governor of Vermont in 2000, complained to federal officials about a significant provision of the cost-containment law signed by Bill Clinton.

In a letter to the US Department of Health and Human Services dated Aug. 3, 2000, Dean said the provision unfairly hurt Medicare recipients at two Vermont hospitals and should be amended. The provision of the law was designed to set standard fees for outpatient services to save the government money and also to reduce the share of those bills paid by elderly and disabled beneficiaries of the federal health program.

"The new system was designed to decrease the amount of coinsurance paid by Medicare beneficiaries," Dean wrote in the letter. "However, for Vermonters using Fletcher Allen and Northwestern hospitals, the methodology . . . will have the result of increasing the coinsurance liability of beneficiaries -- to the tune of 47 percent."

The Dean campaign yesterday defended the complaint as one made by a governor seeking to represent the interests of his state. "We don't see how it's news when a governor fights to ensure that seniors and hospitals in his state get the same treatment as every other state in the country," said Jay Carson, a Dean spokesman.

But rivals charged that Dean's criticism of the cost-containment measure was inconsistent with his earlier support for cuts, when he served as chairman of the National Governors Association.

"We have no doubt that over the next weeks we will continue to hear lots of new excuses and political double talk from Howard Dean about his well-documented hostility to the Medicare program," said Kelley Benander, a spokeswoman for Senator John F. Kerry of Massachusetts.

Erik Smith, a spokesman for Representative Richard A. Gephardt, who has been the most aggressive of Dean's rivals in criticizing his position on Medicare, said: "This letter raises serious questions about Governor Dean's record. . . . It makes you wonder what other correspondence is among the documents from his 10-year tenure under lock and key in Vermont." When he left office, Dean decided to seal nearly half of his gubernatorial papers until 2013.

Gephardt once again lobbed fire at Dean for his Medicare stance during a policy address yesterday in Des Moines, charging, "The 1997 Balanced Budget Act cut $200 billion from Medicare, cuts that Howard Dean still supports to this day, saying . . . `I believe I'm a farsighted person.' Well, to me, there's nothing more shortsighted than trying to balance the budget by cutting Medicare."

Iowa, which holds the nation's earliest caucuses, is a crucial battleground for Gephardt, who hails from the neighboring state of Missouri. Polls in recent weeks have placed Gephardt neck and neck with Dean, making Medicare -- an important issue in Iowa, where seniors participate heavily in the caucuses -- a potential battering ram in the hands of Gephardt.

The cost-saving measure with which Dean took issue in 2000 attempted to reduce outpatient costs. Prior to the change passed in 1997, hospitals had been permitted under Medicare rules to set payments for outpatient services; in contrast, inpatient procedures had been held to a fee schedule starting in 1983.

The result, some health care policy analysts say, was an increase in outpatient services. "Hospitals were shifting a lot of costs in their accounting system onto the outpatient side, where they could get them reimbursed, and out of the inpatient side, where they were not being reimbursed," said Robert Reischauer, who headed the Congressional Budget Office in the early 1990s and now is president of the Urban Institute.

The change, which took effect Aug. 1, 2000, created a nation-wide schedule of fees for outpatient procedures -- lower in many cases than the amounts hospitals and clinics had been charging previously.

At the time, the Congressional Budget Office estimated the rule change would reduce Medicare spending by $7.2 billion over the 1998-2002 period and $4.3 billion over the 1998-2007 period.

But in some hospitals -- such as the ones in Vermont that Dean mentioned -- costs for Medicare beneficiaries increased because the national fees imposed were higher than the amounts the hospitals had been charging, said Tom Ault, the former head of the bureau of policy and development for the federal Health Care Finance Administration, which oversaw Medicare.

In his letter, Dean wrote, "It is my understanding that this increase is totally unrelated to the cost of services provided by these facilities but simply reflects the untoward and unanticipated effects of a formula designed to achieve a nationwide reduction in copayments."

Dean made little immediate headway in his effort. Mark Miller, the deputy director of the Center for Health Plans and Providers, responded in January 2001 that tweaks to the statutory formula had already been made and would provide some relief, but he offered little more, signing off with, "I hope you find this information helpful."

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