Reversing an earlier decision, HCFA announced last week that Medicare will again reimburse hospitals for the unpaid debts of low-income seniors, generating about $2 billion in payments over the next five years.
The change is retroactive to Aug. 5, 1997, HCFA Administrator Nancy-Ann Min DeParle told a meeting of the Greater New York Hospital Association last week.
Last year's balanced-budget law required hospitals to accept Medicaid reimbursement rates as payment in full for services rendered to nearly 500,000 low-income Medicare beneficiaries who also are eligible for Medicaid.
Those beneficiaries are known as "qualified Medicare beneficiaries," or QMBs, and in some cases, dual eligibles. Because of QMBs' low-income status, Medicaid pays their Medicare premiums, co-payments and deductibles.
Under the balanced-budget law, hospitals can't dun QMBs for the difference between what the Medicare payment rate would be and the lower Medicaid rate. The chief proponents of that change were state governors who wanted to reduce healthcare spending.
But HCFA took the issue a step further. Previously, hospitals would record as bad debt what remained of the co-payments or deductibles and subsequently receive some reimbursement from Medicare. Last fall HCFA ruled they could no longer do so.
Hospitals in California and Texas would have felt HCFA's decision the most because both states have lowered their Medicaid reimbursement rates to below the Medicare rate. California alone is home to about 20% of all QMBs.
Led by the Federation of American Health Systems, hospitals complained, arguing that HCFA had misinterpreted Congress' intent. Clinton administration officials hinted earlier this year that legislation might be needed to fix the problem. But last week HCFA reversed its position and announced it will allow any unpaid co-payments or deductibles to be treated as Medicare bad debt.
"The easy answer from HCFA would have been to say they would examine (the issue) for the next five decades, but they went beyond what you normally expect for HCFA," said Thomas Scully, president of the FAHS, which represents investor-owned hospitals. "It was very admirable."
HCFA's reversal does not affect other changes in bad-debt reimbursements under last year's balanced-budget law. Hospital bad-debt payments will be reduced 25% in fiscal 1998, which ends Sept. 30; 40% in fiscal 1999; and 45% subsequently. Those changes are expected to reduce Medicare spending by about $500 million over the next five years, according to the Congressional Budget Office.