Hospitals would receive an increase in Medicare capital payments of more than 20% beginning Oct. 1 under a proposal released late last week by HCFA.
However, industry analysts warned that Congress, which is in a budget-cutting frame of mind, may well trim that increase.
Medicare reimbursements for inpatient services under the prospective payment system would increase 1.5% under the HCFA proposal. The increase is based on the rate of inflation in the cost of hospital goods and services. That was estimated by HCFA to be 3.5% for 1996. However, as part of the 1993 budget act, Congress lowered the Medicare hospital cost adjustment by two percentage points, leaving an update of 1.5%.
HCFA said it would pay hospitals a total of $93.6 billion in fiscal 1996, which begins Oct. 1, up 7.7% from 1995.
The huge jump in capital rates is due primarily to the expiration on Sept. 30 of a provision that requires HCFA to set capital rates at 90% of the actual cost of capital. According to HCFA, it slightly overestimated its capital payments in 1995 when it paid hospitals 91.06% of costs. But because of the expiration of the 90% law, HCFA estimates it would pay an average of 104.52% of costs in 1996 under its proposed plan.
But analysts say all that may change when Congress looks to find the more than $250 billion in Medicare savings it needs to finance the budget plans it recently passed.
According to one Republican House proposal released in conjunction with the budget, capital rates would be lowered to 85% of costs. That would save $7 billion over seven years when compared with what HCFA would have been spent under the 90%-of-costs rule.
Also included in the capital payment rate is a change that would reimburse some hospitals that pay taxes at a higher rate than hospitals that are tax-exempt (May 8, p. 3).
Under the current system, all hospitals, regardless of their tax status, receive an upward adjustment to capital payments designed to cover taxes. But under the HCFA proposal, only hospitals that were paying taxes when the capital PPS rates were first set in 1992 would be given the add-on.