The American Hospital Association last week kicked off its 2000 lobbying drive to get Congress to roll back Medicare spending restraints by $25 billion during the next five years.
"Guess what? We're back," Richard Pollack, the AHA's executive vice president and director of government and public affairs, told more than 500 hospital executives in Washington for the AHA's annual membership meeting.
Last year providers won passage of legislation boosting Medicare and Medicaid provider payments by $16 billion over five years, according to the latest Congressional Budget Office estimates.
Now the AHA is back. But officials were unclear about where the bulk of the relief will come from, just as they were at the beginning of last year. Some $15.5 billion in generic provider relief was unaccounted for in the latest plea.
However, the hospital group did say it will focus on an update to inpatient Medicare payment rates based on hospital inflation. HCFA uses the marketbasket inflation rate as the yardstick for how much inpatient payments should be increased annually. The rate measures the cost of goods and services purchased by hospitals. In federal fiscal year 2000, the marketbasket index was 2.9%.
Under the Balanced Budget Act of 1997, Medicare hospital inpatient payment rates will receive an update of 1.1 percentage points less than the hospital marketbasket in federal fiscal 2001 and 2002. In passing relief legislation last year, Congress failed to change the budget law's reductions to inpatient payments. In his fiscal 2001 budget plan, to be introduced this week, President Clinton is expected to adhere to the original balanced-budget law limits as well.
By shooting for increases in the yearly Medicare inpatient update, rather than seeking the targeted relief of last year, the AHA is trying to unite the hospital industry behind a single lobbying agenda that would help all its members.
Last year's lobbying effort featured periods of infighting because some hospital groups and regions got a better deal than others. For example, Northeast hospitals lost funding because some graduate medical education payments were reformulated (Nov. 15, 1999, p. 3).
AHA officials said updating Medicare inpatient payment rates according to the hospital marketbasket would increase hospital payments by $9.5 billion over the next five years.
Who the AHA is targeting for the remaining $15.5 billion in relief is still unclear.
At least one congressional leader said he was open to the request for again reopening the balanced-budget law. "If there are inequities, if there is unfairness and if you've got the evidence, we can continue to make refinements," said Rep. William Thomas (R-Calif.), chairman of the House Ways and Means health subcommittee.
But aides to key committees on Capitol Hill cast some doubt on whether the inpatient margin was the best target for Medicare relief. And even Thomas said a second round of balanced-budget law relief is more likely to be narrow in scope.
Other provider groups said they also deserved additional relief. Randy Fenninger, a contract lobbyist who works for physician specialty groups and rural psychiatric hospitals, acknowledged that many hospitals need increased Medicare revenue. But he said hospitals received more money as a result of last year's Medicare-relief package, while physicians did not.
"I do certainly think that the physician payment system probably needs some infusion of money," Fenninger said.
Sens. Kay Bailey Hutchison (R-Texas) and Spencer Abraham (R-Mich.) last week introduced legislation that would allow for the full inpatient marketbasket update.
Before passage of the budget law, hospitals were receiving the full inflationary update to their Medicare payments.
As a result, hospitals' inpatient Medicare margins skyrocketed. The Medicare Payment Advisory Commission, which Congress consults on reimbursement issues, last year estimated that Medicare inpatient margins were 15.3% in 1996 and 16.1% in 1997. Even after accounting for the effects of the balanced-budget law, MedPAC estimated a Medicare inpatient margin of 15.7% in 1999.
Although MedPAC still is working on its final estimates of margins in 1998 because of slower-than-usual data collection, the inpatient margins are still widely expected to be healthy, despite the payment restraints.
But the AHA released data showing that hospitals' total Medicare margins, which include income from outpatient departments, home health agencies and rehabilitation services, will amount to a loss of 2.5% by 2002 before rebounding to a loss of 1.6% by 2004.
Abraham and Hutchison announced the introduction of legislation covering the inpatient-update portion of that agenda at a Capitol Hill rally kicking off the lobbying campaign.