The federal balanced-budget plan continued to move forward last week, as two House committees approved budget legislation and a Senate committee started preliminary work on its own plan.
Unlike the bill passed last week by the House Ways and Means Committee, the Senate Finance Committee plan doesn't include a one-year freeze on Medicare hospital payment rates, according to a draft circulated to committee members last week (See chart).
Instead, the committee will call for a fiscal 1998 update equal to the rate of hospital inflation less 2.5 percentage points. The current estimate of the hospital marketbasket, or inflation rate, is 2.7%, according to the Prospective Payment Assessment Commission. That would mean Medicare hospital inpatient rates would increase by 0.2%. However, instead of increasing rates on Oct. 1, the new rates would be delayed three months under the Finance Committee plan.
The Finance Committee plan includes a number of changes to the way Medicare pays capitated health plans, according to the draft leaked last week.
First, about $10 billion (over five years) of disproportionate-share and graduate medical education payments would be carved out of the capitated rates and redistributed directly to hospitals.
Second, in fiscal 1998, payments for beneficiaries who enroll in managed-care plans for the first time would be reduced by 5%.
Provider groups have opposed reducing Medicare reimbursement rates for new enrollees because it would cut payments to provider-sponsored organizations, which, because they are newly created under the budget bill, would have a high percentage of new enrollees.
The committee is scheduled to begin work on its plan this week.
House action last week was marked by a string of victories for Republican committee leaders who passed their Medicare and Medicaid reform legislation as part of their five-year balanced-budget plan.
In passing its set of Medicare reforms last week, the House Ways and Means Committee voted 20-19 to strip a provision that would increase Medicare capital payments for investor-owned hospitals to compensate for taxes paid (See related story, p. 23).
In the end, the Ways and Means Committee passed the Medicare portion of its balanced-budget plan 36-3.
Meanwhile, the House Commerce Committee, which has jurisdiction over Medicare physician payments and Medicaid, passed its own bill by a vote of 29-17. Ranking minority member John Dingell (D-Mich.) joined the panel's 28 Republicans to pass the plan.
However, before the final vote, there was high drama over the "Boren amendment," a federal law that requires state Medicaid programs to compensate hospitals and nursing homes for all reasonable costs. GOP leaders, along with the National Governors' Association and the Clinton administration, support repeal of the amendment.
Hospital and nursing home groups say that unless some protections are put in place to assure states pay fair Medicaid reimbursement rates, budgetary pressures will lead states to cut Medicaid rates.
The Republican budget plan would eliminate the Boren amendment. But earlier in the week, during the deliberations of the House Commerce health and environment subcommittee, a Democratic amendment restoring the Boren amendment passed by a 15-13 vote. Included among the "yes" votes were two Republicans, Richard Burr of North Carolina and Nathan Deal of Georgia, who voted against their leadership.
But the providers' win was short-lived. By the time the measure reached the full Commerce Committee, GOP leaders had regrouped and counterattacked. By a convincing vote of 28-19, the Boren amendment was again repealed. Instead, states will be barred from reducing their Medicaid reimbursement rates to hospitals and nursing homes for 18 months.
Both the Republicans who had earlier voted for the Boren amendment switched their votes in the end.
The Commerce Committee also approved a plan that would give states more than $13 billion in block grants to cover uninsured children.
A separate provision in the Ways and Means budget plan would give other states a chance to participate in a graduate medical education program that is currently being run only in New York.
Under the plan, HCFA pays New York teaching hospitals a flat rate for every residency slot they eliminate. Proponents say it reduces overall GME spending by eliminating residency slots.