Silence can be golden. But some political observers say hospitals' silence as President Bush and congressional Republicans pushed a $1.3 trillion tax-cut plan is likely to come back to haunt the industry.
Liberal political observers, along with at least one Democratic senator, are questioning why hospitals didn't join the chorus of opposition to the tax cut, especially in light of its having become the primary cause of the dramatic drop-off in the federal budget surplus this year (Aug. 27, p. 8). Healthy budget surplus projections in the past two years greased the wheels of nearly $50 billion in Medicare payment boosts from 2000 to 2005.
"I think they were pandering to the president by not speaking up against the tax cut as a way to make sure they're taken care of," says Charles Inlander, president of the People's Medical Society, an advocacy group in Allentown, Pa.
"If the medical community and the healthcare community and the hospital community felt that they were going to get bailed out by keeping quiet, they probably have now learned their lesson," he says.
Sen. Jay Rockefeller (D-W.Va.) says he told hospitals in his state that they should speak up against the tax cut.
"I've had that discussion with some of my (hospitals)," says Rockefeller, who sits on the Senate Finance Committee, which has jurisdiction over Medicare. "But they felt that was somebody else's job."
Although welcomed by many taxpayers, the tax cuts reduced government revenue by about $70 billion in fiscal 2001 alone. That revenue loss, combined with increased spending and lower tax collections because of the economic slowdown, caused White House budget forecasters to reduce their estimates of the 2001 federal budget surplus from $281 billion in April to $158 billion in August.
Of the latest estimate, all but $1 billion is expected to come from surplus Social Security payroll tax collections, which both Democrats and Republicans have declared off-limits as a financing pool for government programs. That means that nearly all of the surplus tax receipts for the Medicare Hospital Insurance Trust Fund were spent on other government programs.
The Congressional Budget Office's prediction is more dire. It says the government will spend $9 billion in Social Security surplus revenue, in addition to the Medicare surplus.
With barely any non-Social Security surplus remaining, Congress and the White House may find their hands tied when providers ask for Medicare payment increases this fall.
Hospital groups defend their silence by saying that they didn't know how much the tax cut and economic slowdown would affect the surplus this year.
"We knew it would shrink the surplus, but I don't think anybody thought it would shrink it this much," says Herb Kuhn, vice president of advocacy with the Premier hospital network.
In addition, the groups agree with Inlander that it would be politically costly for them to get on the wrong side of the administration in the first year of Bush's tenure.
"It would have been very unusual for the hospital community to go and take a general position on an overall economy issue," says Edward Goodman, vice president for public policy with the VHA hospital alliance. "It would have been highly partisan, and it would have been foreseeing things that were not clear at the time."
The industry hasn't necessarily steered clear of the partisan fray in the past. As a new Republican congressional majority in 1995 began developing plans to balance the federal budget in seven years in part through more than $200 billion in Medicare spending-growth restraints, the American Hospital Association inflamed Republican leaders by sponsoring advertisements with the AHA's state hospital associations that opposed the budget plan.
That budget plan also included billions of dollars in tax cuts that ultimately led to hundreds of billions of dollars in federal debt. At the time, Republican leaders responded by pointing out to rank-and-file GOP members that they considered the AHA an opponent because its political action committee gave twice as much money to Democrats as to Republicans in the 1994 election campaigns.
But in 2000, the hospital industry hardly could be seen as a GOP opponent. Donations from the AHA's PAC are divided evenly between Democrats and Republicans, while the Federation of American Hospitals, the other chief hospital-industry political donor, gave nearly two-thirds of its donations to Republicans.
If the hospital industry was silent on the tax cuts, the Catholic Health Association says it reminded members of Congress to set aside money for expanding health insurance coverage for uninsured people before Congress passed the tax bill.
In a letter to all senators dated March 30, the CHA urged Congress to set aside $132 billion over 10 years, equal to what Bush called for during his presidential campaign, to expand access to insurance. Congress' budget blueprint eventually called for $28 billion over three years.
Michael Rodgers, government relations director at the CHA, says the hospital industry's reluctance to oppose the tax cuts was understandable. "A new administration is going to have its policies, and you want to work along with a new administration."