Medicare payments will rise by about $32.3 billion between 2001 and 2005 under terms of legislation enacted late last year to ease spending restraints from the Balanced Budget Act of 1997, according to a new government estimate released last week.
Answering a lingering question since the relief law took effect-which industry segment would get the largest share of the payment increases-the Congressional Budget Office said hospitals will be the biggest beneficiary, receiving a projected $12.5 billion. Medicare HMOs will be the next-biggest beneficiary group, receiving a projected $11.2 billion.
Previous estimates put the cost of the Benefits Improvement and Protection Act, passed in December 2000, at $35 billion.
Hospital lobbyists weren't surprised by the CBO's estimate. "The score is reflective of where we believed it was in December," said Dan Boston, assistant vice president of legislation and public affairs at the Federation of American Hospitals. He said hospitals were "very happy" with the package.
The BIPA followed legislation in 1999 that increased spending by $16.1 billion between 2000 and 2004 for all providers paid under Medicare, Medicaid and state children's health insurance programs.
This year, the American Hospital Association is lobbying for new increases worth about $16.2 billion between 2002 and 2006. Hospitals say they need higher reimbursements to hire healthcare workers.
Under the BIPA, hospitals will receive $5.7 billion for their outpatient departments, the CBO said. Increased inpatient payments will account for $5.2 billion, largely from a full inflation update to payments instead of the previously mandated update of 1.1 percentage points less than the inflation rate.
Revisions to the update will bring hospitals $1 billion in 2001 and $1.8 billion in 2002.
The five-year cost of the BIPA should be just $17 billion, the CBO said, because the act closes a Medicaid loophole that states use to increase their federal matching funds, a revision that will save the federal government $16.3 billion over five years.
