Federal officials warned last week they may slash a proposed generous increase in Medicare capital payments if the White House and Congress fail again to reach a budget agreement.
The officials made the statement in releasing HCFA's proposed prospective payment system regulations for fiscal 1997, which begins Oct. 1. Under those regulations, Medicare capital payments to hospitals are scheduled to increase by 4.4% for 1997.
The plan also says that basic payments for hospitals reimbursed under PPS would increase 2.3% as most observers expected. That's based on the projected rate of inflation in hospital costs, estimated by HCFA to be 2.7% in 1997. However, as part of the 1993 budget agreement, Congress lowered hospitals' increases by 0.5 percentage point. HCFA also makes other minor technical adjustments that raised the reimbursement rate by 0.1 percentage point, leaving a final update of 2.3%.
HCFA estimated that payments to hospitals for inpatient services would grow 7.5% in fiscal 1997 to $90.8 billion from $84.5 billion. The HCFA proposal calls for specialty and other non-PPS hospitals to receive an increase of 1.7% to 2.7%.
The increase in the capital rate would mark the second time in as many years that capital payments, which are designed to reimburse hospitals for building and equipment expenses, have increased significantly.
Last year, because of the expiration of a law that required HCFA to pay hospitals only 90% of their costs, capital payments jumped more than 27%. According to HCFA, hospitals actually received nearly 110% of their actual capital costs from Medicare.
The Clinton administration said last year's increase was not "necessary or warranted," and said earlier this year that it would decrease payments by nearly 16%.
But in last week's regulation, HCFA said it had decided to hold off on the reduction because it expected a balanced-budget plan to be enacted and believed the reduction would be included in the plan.
But HCFA Administrator Bruce Vladeck said that if no budget agreement is reached, HCFA may "include a capital rate reduction in the final regulation."