Hospital groups expect the Clinton administration's fiscal 2000 budget to reduce increases in Medicare hospital inpatient spending by at least $10 billion more than planned, and they are organizing to head off the move before the budget process gets rolling.
Most of the reduction in budgeted outlays would come from trimming even more from the annual hospital Medicare inpatient payment update.
According to several sources familiar with the process, the budget is likely to call for reducing the update by as much as 2% in each of the next five fiscal years, through fiscal 2004.
Under legislation enacted in 1997, the annual increase in hospital Medicare inpatient payments will be reduced by 1.8 percentage points in fiscal 2000. A 1.1 percentage point cut will take effect in 2001 and 2002, after which there will be no reduction. In total, the 1997 budget reduced growth in Medicare hospital inpatient payments by about $17 billion over five years.
Even though current law covers the next three years, the executive branch is still required by law to submit a budget each year. Congress is not required to enact a budget, however.
Many experts believe Republican leaders would like to enact a tax cut this year, which likely would include reopening the budget deal.
That has hospital groups concerned that they could be targeted for further Medicare reductions of at least $10 billion over five years.
"We're definitely at risk," said Richard Pollack, executive vice president of federal relations for the American Hospital Association. "On top of what we have gone through already, this is not a good idea both policywise (and) politically."
While the White House budget is not scheduled for release until later this month, hospital groups are not taking any chances.
According to Pollack, the AHA has already begun contacting Democratic legislators to try to prevent the cuts before the budget is unveiled.
Making the task more difficult, however, is the fact that to justify the additional hospital Medicare cuts, Clinton administration officials are citing record hospital profit margins on Medicare inpatient care (See chart).
The Medicare Payment Advisory Commission said last month that hospital Medicare inpatient margins reached a record 16.1% in 1997 and are projected to top 15% in 1998 and 1999.
Hospitals strenuously object to the MedPAC analysis, arguing it paints an unjustifiably rosy picture of hospitals' financial health.
"Simply looking at (inpatient margins) in isolation is shortsighted and off-base," Pollack said.