Hospitals blitzed Capitol Hill last week to protest President Clinton's proposal to freeze Medicare hospital inpatient payment rates for fiscal 2000 as part of a package of more than $9 billion in provider payment reductions.
In proposing the freeze, worth $3.9 billion, administration officials characterized hospital inpatient payments as "excessive" and argued that they are trying to protect the Medicare trust fund.
The Clinton administration pointed to the Medicare Payment Advisory Commission's findings that hospitals are projected to have earned a 15.9% profit on their Medicare inpatients in 1998.
"We have a responsibility to the trust fund as trustees of the system to make very prudent decisions on what we will pay," HHS Secretary Donna Shalala said.
But the administration did not necessarily heed the recommendation of MedPAC, a congressional advisory panel, which recommended an "update" adjustment in the range between zero and 2.6%. MedPAC said current law, which calls for a 0.7% update, is adequate.
In the same proposal in which he called for the inpatient freeze, Clinton also asked Congress to dedicate 15% of the projected federal budget surplus-$700 billion over 15 years-to extending the life of the Part A trust fund to 2020 from 2008.
If Congress follows through on Clinton's proposal to freeze the hospital update, it would be the second time in the past three years that hospitals have experienced no annual increase in their Medicare inpatient payments. Under a 1997 law, inpatient payments were frozen in fiscal 1998.
The proposal got a cool reception on Capitol Hill, where hospital executives, in Washington for the American Hospital Association's annual membership meeting, asked members of Congress to reject a freeze.
Rep. William Thomas (R-Calif.), chairman of the House Ways and Means Committee's health subcommittee, criticized the proposal, saying Clinton was only trying to reduce hospital payments to pay for other spending programs.
Thomas noted the conflict in Clinton's plan to dedicate budget surplus money to extending the life of the Medicare trust fund.
"He's awash in a sea of cash, or so he says," Thomas said at the AHA meeting (See related story, p. 8).
After his speech, Thomas told reporters: "We're going to rely on MedPAC, as we always do. The president's desire to get money will not determine what we do with the hospital update. What's happening in the real world will determine what we do with the hospital update."
Meanwhile, in a press conference sponsored by the AHA, Sen. Rod Grams (R-Minn.), said the freeze would hit small and rural hospitals hardest.
"The federal government needs to be lean and efficient, but not at the expense of our small and rural hospitals," Grams said.
But the high profit margins on Medicare inpatient stays may make it harder for hospitals to fight the freeze, said one consultant.
"Once again the hospital industry is going to have a difficult time as long as they're showing double-digit margins on the inpatient side," said Lawrence Goldberg, director of national healthcare affairs in the Washington office of Deloitte & Touche.