The prospect of higher Medicare payments for healthcare providers brightened substantially last week as President Clinton proposed a $40 billion relief package over the next 10 years.
While it must get congressional approval, Clinton's proposal gave a boost to providers lobbying for provisions offsetting payment restraints enacted under the federal Balanced Budget Act of 1997.
In separate action, the House passed legislation that aims to preserve unexpected Medicare savings for the Medicare program through a proposal called the Medicare "lockbox."
Clinton's relief plan represents a nearly $70 billion turnaround for the president, who earlier this year sent Congress a fiscal 2001 budget proposal that included $30 billion in new provider payment reductions over the next 10 years, in part through extending provisions of the balanced-budget law.
"Payments are too low in important areas, and Medicare patients are at risk," Clinton said at a White House appearance announcing the new proposal. "I think all of us recognize, and I think this is bipartisan recognition, that when we passed the Balanced Budget Act of 1997, we did not provide adequate funding for the medical providers of the country."
The proposal got immediate support from hospital groups, although they almost simultaneously began pushing the White House and Congress for an even bigger package.
The package, worth $21 billion in the first five years, would give $5 billion over five years to hospitals.
Written statements from the heads of the American Hospital Association, the Federation of American Health Systems and the Catholic Health Association all described the Clinton proposal as a good first step while hinting that they want more.
Hospital groups had been seeking a package worth $25 billion. Their chief objective had been updates to Medicare inpatient payments in 2001 and 2002 at a rate equal to an inflation yardstick called the marketbasket index. Under the budget act, the hospital update is set at 1.1 percentage points below the marketbasket in 2001 and 2002.
The Clinton plan gives the full marketbasket update in 2001 only.
A statement from AHA President Richard Davidson described the Clinton proposal as "a good step forward."
"The administration's package is a strong step in addressing the fiscal stress that America's healthcare providers have faced from Medicare payment reductions," said Thomas Scully, president and chief executive officer of the health systems federation.
But some hospital lobbyists said the size of the package will grow. "Let the bidding war start," said one, who asked not to be identified.
Meanwhile, House Speaker J. Dennis Hastert (R-Ill.) said in a letter to Clinton that congressional Republicans "intend to assess this important issue this year and provide relief where necessary."
The Clinton proposal comes on the heels of legislation enacted last year that increases Medicare, Medicaid and State Children's Health Insurance Program payments to providers by $16.1 billion over five years. It counteracts the effects of the budget law, which aimed to reduce Medicare spending by $112 billion between 1998 and 2002.
Provider groups are hopeful that lawmakers will agree to give the difference between the Congressional Budget Office's Medicare spending projections earlier this year and a CBO estimate due out in coming weeks to Medicare provider payments. "The chances have improved for a second (provider payment increase) because of the president's proposal . . . and we anticipate that the CBO is once again going to show that (Medicare spending estimates) are plummeting," said Frederick Graefe of the law firm Baker & Hostetler and a lobbyist who works for the federation.
"We're a lot closer to this goal after the activity of this week," said Herb Kuhn, vice president of advocacy for the Premier hospital alliance.
Other segments of the industry took the same stand as the hospitals. Karen Ignagni, president and chief executive officer of the American Association of Health Plans, described the Clinton proposal as "an important step forward."
The proposal would provide $1 billion over five years and $3 billion over 10 years for managed-care plans contracting with Medicare.
Ignagni said the plan "falls far short of what more than 6 million seniors and disabled beneficiaries across this nation need and deserve: a strong and stable Medicare+Choice program."
The House aimed to neutralize a White House offensive on Medicare by passing the lockbox proposal. The lockbox tries to preserve Medicare savings for Medicare by barring Congress from adding the surpluses in the Medicare Hospital Insurance Trust Fund to the overall federal budget surplus.
While not specifically designating surplus dollars for Medicare, the move was aimed at making it appear that Medicare savings are not being used for unrelated spending programs.
Vice President Al Gore has endorsed a lockbox proposal, as has Clinton in releasing his Medicare payment increase proposal.
Despite the positive developments for providers, dangers remain.
For example, congressional action will be interrupted this summer by national party elections. Congress is likely to adjourn by early October so members can campaign for re-election. That gives providers little time to lobby for the increases.
In addition, Democrats and Republicans are feuding over the shape of a Medicare prescription drug benefit, which could affect the fate of other Medicare legislation (See story, p. 17).
Also endangering an increase is skepticism from some members of Congress about how much relief providers need. Rep. William Thomas (R-Calif.), chairman of the House Ways and Means health subcommittee, recently circulated a letter to his GOP colleagues suggesting financial questions they should ask when meeting with healthcare executives.
Earlier, a summary of a Goldman Sachs analyst's report that touted hospitals' brightening financial outlook was used to argue against another round of Medicare payment increases.