Congress' last gasp for 2000 breathed new life into hospitals. Lawmakers late Friday passed a massive budget and spending bill that included at least $11 billion in new federal healthcare spending for hospitals between now and 2005.
As Congress raced to a long-delayed adjournment, President Clinton and Republican congressional leaders hammered out a compromise spending plan that will increase spending for Medicare, Medicaid and state children's health insurance programs by an estimated $35 billion over the next five years.
Clinton was expected to sign the bill by this week. Most of the big payment increases for hospitals won't take effect until April 1, 2001.
The legislation rolls back some spending-growth restraints enacted under the Balanced Budget Act of 1997, which aimed to reduce projected Medicare and Medicaid spending by about $112 billion between 1998 and 2002.
Responding to claims that the budget law reduced payments more than that, Congress last year passed legislation that increased spending for Medicare and Medicaid programs and SCHIP by $16.1 billion between 2000 and 2004.
But the American Hospital Association signaled that it may be back next year seeking another increase in Medicare payments (See story, p. 8).
"This bill is part of a series of much-needed steps to close the gap between what was intended and what actually happened," said Richard Davidson, president of the association, in a written statement. "Thanks to Congress and the administration, we've made real progress down the path to (Medicare) relief this year."
Other hospital groups, however, said they believed they had worn out their welcome on Medicare payment issues and instead will try to work with Congress on expanding coverage for the uninsured.
"We are not going to be back next year for any kind of major (Medicare) adjustment because I don't think we'll be well-received on (Capitol) Hill," said Thomas Scully, president and chief executive officer of the Federation of American Hospitals.
An earlier version of the legislation passed the House as part of tax-cut legislation in October. Clinton, however, threatened a veto because he said it increased Medicare+Choice payments too much at the expense of providers.
The new legislation, which makes changes to that House-passed measure, includes a partial win for hospitals: a full inflation update to their Medicare inpatient payments for 2001. Under the balanced-budget law, that annual update had been set at 1.1 percentage points below an inflation figure called the hospital marketbasket index for 2001 and 2002. After that, the law calls for no reduction from the marketbasket index.
But that victory came at a cost. Instead of a full inflation update for 2002, Medicare hospital inpatient payments will be set at 0.55 percentage point below the marketbasket index.
But if hospitals in general didn't get everything they wanted, some of them were big winners. Rural hospitals, in particular, got new money out of the 11th-hour negotiations between the White House and Congress.
In the last-minute talks, negotiators added $900 million to Medicare disproportionate-share payments for rural hospitals over the next five years. That came on top of $900 million in disproportionate-share payments included in the initial bill that passed the House, for a total of $1.8 billion.
"It's a very good sweetener for those of us who live in rural America who were mostly, but not totally, satisfied by the original bill," Sen. Charles Grassley (R-Iowa), the likely new chairman of the Senate Finance Committee, said.
Likewise, teaching hospitals also got a little more out of the negotiations. The legislation delays to 2003, rather than to 2002 as called for in the original bill passed by the House, a scheduled reduction in hospitals' reimbursement for the indirect costs of operating a residency program.
That change was worth $400 million to teaching hospitals over five years. The changes to the indirect medical education adjustment will now add $1 billion to teaching hospital revenue between now and 2005.
Meanwhile, Clinton's veto threat yielded no new restrictions on Medicare+Choice plans. As they negotiated the bill, administration officials pushed Congress to insert provisions that would require Medicare HMOs to stay in the program two or three years if they signed a contract, or at least give them financial incentives to do so.
The final bill, which includes about $11 billion in new Medicare managed-care payments over the next five years, includes no such lock-in language.