The debate in Washington over whether to freeze Medicare hospital inpatient reimbursements for one year is quickly moving into the realm of the silly.
The issue arose when the Prospective Payment Assessment Commission, which advises Congress on Medicare Part A matters, recommended the one-year freeze in its annual report. ProPAC commissioners based their recommendation on data that showed hospital Medicare margins are at their highest point in a decade. Moreover, a smaller percentage of hospitals are losing money on Medicare. ProPAC also pointed out that because Medicare hospital payments are the sum of many factors, even if payment rates are frozen, total Medicare payments to hospitals will still rise by about 2%.
In years past, ProPAC has issued many such recommendations, all based on the most up-to-date scientific analysis and all having the impact of a report on high cholesterol at a meeting of NFL linemen.
But this year was different. The Clinton administration, looking for a way to save money and balance the budget by 2002, seized on the ProPAC recommendation and made a freeze its opening offer in budget negotiations.
Never mind that a few months earlier, HHS Secretary Donna Shalala had stood in front of the annual convention of the American Hospital Association in Washington and pledged not to recommend a freeze. When Shalala made her announcement at the convention, AHA officials figured they had dodged a bullet. Surely the administration wouldn't renege on a seemingly airtight pledge.
It was about this time that the issue of a freeze began to take on political and emotional ramifications beyond the policy itself.
The AHA inadvertently opened the trap door to sillyland when it held a press conference at its Washington offices to refute ProPAC's analysis.
In an innovative twist on the "budget cuts will devastate hospitals" strategy, the AHA brought in a professor from Northwestern University and a Wall Street analyst to say hospitals really are in a very precarious financial position. It was not a convincing performance.
When the administration formally recommended a freeze as part of its fiscal 1998 PPS update regulations, Shalala said the freeze was "in accordance with the bipartisan agreement to balance the federal budget."
No detail too small to bicker over, the AHA pointed out that no such freeze was actually in the agreement. "It is unfair and inaccurate to state in official administration documents that such an agreement exists," the AHA wrote in a letter to the Clinton administration.
Unfortunately for the AHA, its letter to Clinton was sent after the freeze proposal was already under consideration by a House subcommittee, which later approved the measure on a unanimous vote.
Meanwhile, the Senate Finance Committee appears ready to give hospitals a fiscal 1998 update of 0.3% and delay the effective date from Oct. 1 to the end of the calendar year.
In any case, from an AHA standpoint there are some very good reasons to fight hard against a freeze:
Reason 1: The same level of cuts can be obtained many other ways that wouldn't be nearly as harmful to the hospitals with negative Medicare margins. For instance, instead of a freeze in the first year of the five-year budget plan, lawmakers could give hospitals a small update in fiscal 1998 and reduce the updates in the remaining four years.
Reason 2: A freeze has negative implications for hospitals in bond and equity markets.
Reason 3: Once in place, a freeze can easily be extended. Remember the short-term airline ticket tax?
Reason 4: The Mike Bromberg theory. Bromberg, president emeritus of the Federation of American Health Systems, is fond of saying that you should fight to put off cuts one year at a time because things change yearly in Washington.
And finally, reason 5: Right or wrong, AHA leaders got their membership worked up over the issue, and that automatically makes it a priority.
After the administration suggested the freeze at the outset of budget negotiations, Republicans jumped on the bandwagon. Rep. William Thomas (R-Calif.), who heads the House Ways and Means health subcommittee, included the freeze in his balanced-budget bill that earlier this month passed his panel by a 13-0 vote.
It's fair to ask why Thomas would choose to propose the freeze and doom himself to the complaints of nearly a dozen hospital groups. When asked, Thomas chose not to justify his decision based on policy. Instead, he smiled slyly and said he was merely acceding to the wishes of the Clinton administration.
Some have suggested Thomas has proposed the freeze as a stick in the eye to the AHA, which opposed the Republican balanced-budget plan in 1995.
Whatever the real reason, it's now clearly an emotional issue both for hospital groups and for lawmakers.
Who would have thought, after the healthcare reform fight and the last budget battle, that a Medicare reform plan that included anything more than the word "Medicare" on a blank sheet of paper could pass a House panel by a unanimous 13-0 vote?
Heck, it took the Senate a week to pass a measure denouncing atrocities in Bosnia a few years ago.
It's amazing just how different the mood is this year.
Last year, for example, a fight over medical savings accounts almost derailed the health insurance reform bill, which passed only after both sides agreed to a limited program. This year, Thomas said he would include a provision in the budget bill that would allow seniors to enroll in MSAs. Thomas had in mind a full-time, full-blown program.
But after the White House signaled its opposition to the plan, the usually pugnacious Thomas quietly reduced the program to a 500,000-person demonstration project.
There is still a very long way to go. But if the MSA compromise is any indication, there may actually be an agreement that purports to balance the budget by 2002.