A new congressional advisory panel is singing the same old song: Medicare significantly overpays hospitals.
The 15-member panel, which met last week in Washington, will tell Congress in a report next year that the mandated 0.7% increase in Medicare inpatient payment rates in fiscal 1999 is way too generous.
In fact, that increase may be as much as 10 full percentage points more than what hospitals need to maintain their current level of profitability from treating Medicare inpatients, the panel said.
Luckily for hospitals, it would take a second act of Congress to undo what it did in this year's federal balanced-budget law. The law froze Medicare inpatient rates in fiscal 1998, which began Oct. 1, and gives hospitals limited rate hikes in the final four years of the five-year budget accord.
Congress implemented the one-year freeze based on the recommendations of the same advisory panel, which has documented escalating hospital Medicare profit margins.
But the budget agreement doesn't cover Medicare payments to hospitals for their capital costs.
In the same report that will tell hospitals that Medicare is overpaying hospitals for inpatient care, the panel will recommend that Medicare capital payments be frozen or increases in payments limited.
The panel, the Medicare Payment Advisory Commission, was created as part of the balanced-budget act as a successor to the defunct Prospective Payment Assessment Commission and Physician Payment Review Commission.
Based on the tone of MedPAC's meeting in Washington last week, the new panel seems to be headed in the same direction as was ProPAC.
According to a MedPAC analysis, changes in the way hospitals do business mean Medicare inpatient payment rates could actually be reduced in fiscal 1999 by somewhere between 1.8% and nearly 10%. Chief among the business changes cited are different hospital discharge patterns.
MedPAC Vice Chairman Joseph Newhouse said that compared with the "atom bomb" of a possible 8% to 10% rate cut, the statutorily mandated 0.7% "if anything is generous."
But this year it is unlikely that Congress will accept the group's recommendation of either a small cut or small increase. That's because to do so, Congress would have to reopen the budget law, a prospect that's unlikely in an election year.
"(Congress) is pretty tightly locked into the balanced-budget act," said Richard Wade, senior vice president for communications of the American Hospital Association. "(MedPAC) is making a point: They are new, and they are asserting themselves."
The increase in fiscal 1999 Medicare capital payment to hospitals may be a different story.
By law, the HHS secretary sets the capital rate. That means MedPAC's recommendation could influence the outcome.
"They're really beating up on us," said one hospital lobbyist, who asked not to be identified, during the MedPAC meeting. "I thought this commission would take it easy on us. I guess not."