A report suggesting that Medicare cuts in President Clinton's healthcare reform plan would put severe stress on hospitals came under fire last week from lawmakers arguing that the study showed an incomplete financial picture.
The study, prepared by the consulting firm Lewin-VHI for the American Hospital Association, was released at a hearing of the Senate Finance Committee. The report predicted that the $118 billion in five-year Medicare spending restraints proposed by the president would push hospitals' Medicare inpatient operating margins down to a devastating average of -28.9% by the year 2000 (See chart).
But some members charged that the projections failed to account for the offsetting fiscal benefits of giving health coverage to all Americans, which would relieve hospitals of their charity-care burden, and of raising Medicaid reimbursement rates.
Sen. John D. Rockefeller (D-W.Va.), one of the harshest critics of the report, listed its omissions at the hearings. He argued that in addition to ensuring universal coverage and equalizing Medi-caid and private-sector rates, the Clinton plan would help hospitals by reducing paperwork and providing malpractice reforms and antitrust relief.
Richard Davidson, president of the AHA, said that despite these benefits, universal coverage wouldn't necessarily guarantee that all patients would gain access to care and that some still would seek treatment from hospitals' emergency departments because they didn't have a physician.
At a separate news conference, Rep. John Dingell (D-Mich.), chairman of the House Energy and Commerce Committee, warned that while the AHA study gave dismal predictions, the outcome would be worse if Congress failed to enact a comprehensive reform bill. Providers will be "hurt even more," he predicted, as Medicare and Medicaid payments are slashed by lawmakers intent on holding down budget deficits.
Congress has been bombarded with a series of reports contending that "if a bill passes, the sky will fall," said Rep. Patricia Schroeder (D-Colo.) in commenting on the AHA study. "We want them (providers) to address what happens if a bill doesn't pass, because the sky will also fall."
One dire prediction about current approaches to healthcare delivery came in the annual report released last week from trustees of the Medicare hospital insurance trust fund. The panel predicted that the program will be bankrupt in 2001, under the most likely assumptions.
This year's prediction was only slightly more sanguine than last year's forecast, which warned that the fund would go bust in 1999. Hospital payments are expected to continue rising at a brisk pace each year, from $116.6 billion in 1995 to $197.2 billion in 2001.
The new reports came as hospitals continue to earn record profits, according to the AHA's own figures. Hospitals posted an aggregate total profit margin of 5.8% through the third quarter of last year as well as a 0.9% operating profit margin over the same period. Those are the highest third-quarter margin figures since 1986. Aggregate profits earned by the nation's hospitals jumped more than 18% in 1992 to nearly $12 billion.
Congress returned from a two-week recess and resumed committee work on healthcare reform. The full Ways and Means Committee has scheduled a series of closed-door caucuses-they began last week and will continue through April. According to sources familiar with the proceedings, the panel will use as its starting point for deliberations the reform plan approved last month by the health subcommittee, minus its financing scheme, which included a cigarette tax and a 1% surcharge on large self-insured businesses.
Mr. Dingell said he hoped to have enough votes secured on the Energy and Commerce Committee for his proposal for a reform starting point by this week. Then, the panel will begin formally writing a bill. Mr. Dingell's plan includes a scaled-back employer health insurance mandate, which gives a bigger break to small businesses, and a cap on federal health spending.
"Take my word for it, we are making progress," he told reporters last week. "Those who have said they would not support (my proposal) went home over the break, and they may be revising their position," he said, referring to pressure applied to members by their constituents at home.