WASHINGTON (CNN) -- In his first budget proposal for 2000, President Clinton on Monday announced plans intended to cut costs and fight Medicare fraud.

The White House said his proposals may cut federal government medical spending by at least $2.1 billion.

"Every year, Medicare is cheated out of billions of dollars, money that translates into higher taxes on working Americans, higher co-payments and premiums for elderly Medicare recipients," Clinton said. "This has become, as I said, especially significant as we grow older and more and more of us become eligible for Medicare."

Clinton's package of legislative initiatives is meant to encourage the reporting of fraud and cut abuses such as billing for services that were not delivered. It also limits the amount Medicare will pay to medical providers for certain drugs or equipment.

Medicare only covers specific medications that must be administered by a doctor or in a hospital, such as those used for organ transplantation.

A Department of Health and Human Services report by an inspector general found Medicare paid more than twice the average wholesale price, or more, for certain drugs. It said price markups for 22 drugs cost Medicare hundreds of millions of dollars annually.

Clinton's plan, if approved by Congress, includes cutting Medicare reimbursements for Epogen, a drug used to treat anemia due to chronic renal failure, to reflect market prices. The inspector general's report found the reimbursement rate is about 10 percent higher than the cost of the drug.

The plan would also:

• Give the Health Care Financing Administration power to begin competitive bidding this spring for durable medical equipment such as hospital beds. It is hoped this will help lower Medicare's costs for such equipment.
• Limit health care providers from billing Medicare for services not rendered or only given to a few patients. This may cut down on abuses in group therapy treatment.
• Require private health insurers to report which Medicare patients they insure, to prevent providers from billing Medicare for claims owned by insurers.
• Gives HCFA the authority to recover twice the amount owed to Medicare from insurers who allow Medicare to pay claims insurers own. It can impose fines on insurers for not reporting legal settlements in which Medicare should have been reimbursed for payments.

RELATED AUDIO

Clinton discusses his plan for "Medicare fraud hunters." 484K/35 sec. AIFF or WAV sound

The White House administration also announced plans to send out memorandums to all health care contractors for Medicare, telling them they must refer suspicious activity by providers to the inspectors general's office.

The administration said it should encourage the Medicare contractors not to withhold evidence of suspected fraud involving small amounts of money.

The Associated Press contributed to this report.