It will now be up to congressional leaders to determine if hospital Medicare inpatient payments will be frozen next year after the Senate passed a version of the balanced-budget plan last week without a freeze provision.
Leaders from the House and Senate, together with Clinton administration negotiators, are scheduled to begin meeting to hash out their budget bill differences (See chart) when Congress returns from its Independence Day recess next week.
The House version calls for a Medicare freeze, which has been adamantly opposed by the American Hospital Association and hospital lobbyists. For all practical purposes, the House-Senate negotiations will represent the last chance special-interest groups will have to influence the legislation.
The Senate plan would increase hospital Medicare inpatient payment rates for 1998 by the rate of hospital cost inflation, called the "marketbasket," minus 2.5 percentage points. The new rates would take effect Jan. 1, 1998, three months later than usual.
The House passed a companion balanced-budget bill last week that includes a freeze on Medicare hospital inpatient payment rates for fiscal 1998, which begins Oct. 1, 1997.
Last week's 73-27 Senate vote on the Medicare, Medicaid and child health portions of the budget plan came after liberal Democrats were rebuffed in their attempts to eliminate several provisions that would increase the cost of Medicare for beneficiaries.
Because the beneficiary provisions are not included in the House package, they are likely to be among the most controversial when lawmakers begin negotiations.
leaders hinted they would support the beneficiary cost hikes in conference if the White House is willing to take the lead.
But so far, that hasn't happened.
Last week, Clinton administration officials said only that they would prefer to work on wholesale changes in Medicare, such as increasing the eligibility age or means testing, as part of a long-term strategy to shore up Medicare's finances.
For hospitals, another significant difference between the two bills involves what constitutes a transfer and what counts as a discharge under Medicare. The House bill expands the definition of a transfer to include moving patients to nursing homes, skilled-nursing facilities and home health agencies. That means if a patient is sent to one of those facilities before the average length of stay expires, the hospital will not receive the full DRG payment it would under a normal discharge.
Bowing to pressure from hospital groups, the Senate last week eliminated home health agencies from the list of moves that constitute a transfer.
Nursing homes fought the move because they say it will give hospitals an incentive to discharge patients to their own home health agencies rather than send them to skilled-nursing facilities and other long-term-care facilities.
The Congressional Budget Office said the change would cost Medicare $500 million over five years. To pay for it, the Senate moved to reduce hospital inpatient payments in 1999 by an additional 0.3 percentage points.
The CBO also said last week that if provider-sponsored organizations are allowed to contract with Medicare, it will cost the program nearly $1 billion over five years because the PSOs will enroll the healthiest patients.
"Doctors in many provider-sponsored networks would be able to steer healthy patients to the network and advise sick patients to remain in Medicare's fee-for-service program," the CBO said.
Hospital groups say there is no basis for the CBO's contention that physicians would, or even could, pick and choose which patients they enroll in a PSO.
However, Julie L. Goon, vice president of the American Association of Health Plans, said it was "reasonable to believe that the people closest to a patient would have better knowledge of their health status, and the potential would exist to steer people according to that."
The CBO report also cast doubt on the Senate children's health initiative, which would spend about $16 billion over five years from fiscal 1998 to 2002 to expand insurance coverage. The CBO said the initiative would result in only 560,000 children receiving health insurance. That estimate is similar to one made earlier on the House balanced-budget plan.
Also last week, the House and Senate passed separate versions of the tax portions of their respective budget bills. Both versions include provisions affecting the $150 million cap on the amount of tax-exempt bonds that can be held by not-for-profit hospitals.
The Senate plan would eliminate the cap, while the House plan would raise the cap by $10 million each year until 2002. Thereafter it would remain at $200 million.