As the White House and Congress return to the familiar territory of deficit spending, they may also turn to a familiar remedy to stanch the bleeding: Medicare payment reductions.
Most healthcare lobbyists fear that President Bush's budget proposal, to be made public Feb. 4, will contain additional restraints on annual Medicare payment updates for hospitals and other providers beyond those called for by the Balanced Budget Act of 1997. Although there has been no indication from the Bush administration about its intentions for fiscal 2003, escalating budget deficits and healthcare cost inflation may combine to make clamping down on payment growth attractive.
The easiest way to do so would be to extend payment growth caps initially established under the five-year budget law, which is set to expire after fiscal 2003. Although providers won some relief in the past few years from some of the cuts, they had no success last year. And with healthcare costs beginning to spiral upward again and Medicare running a paper surplus, the temptation to use Medicare funds to keep the deficit lower may be overwhelming.
According to the Senate Budget Committee, the federal government will run a cumulative $772 billion deficit from 2002 to 2011 if the surpluses in the Medicare and Social Security trust funds aren't used to offset spending elsewhere.
Meanwhile, recently released data on healthcare cost inflation make hospitals a ripe target. The Centers for Medicare and Medicaid Services says hospitals are the drivers of healthcare cost inflation (Jan. 14, p. 12) while the Congressional Budget Office's monthly numbers show a 6.7% increase in Medicare expenditures for the first quarter of fiscal 2002.
"We're hopeful that there will be no further cuts for hospitals . . . but we'll have to wait to see," says Edward Goodman, vice president of public policy at the VHA hospital alliance.
Richard Pollack, executive vice president of the American Hospital Association, says the November congressional elections may make lawmakers reluctant to propose anything that might hurt hospitals.
"It is difficult for me to believe in an election year that anyone would want to be out there saying there should be cuts in the Medicare program and at the same time be pushing for an economic stimulus package and tax cuts," he says.
It would be a repeat of the early-year budget politics of the past. In years in which White House budget proposals have contained Medicare payment reductions, hospital groups often spend much of their political capital in Congress just battling to make sure the reductions don't become law, leaving little ground from which to fight for payment increases.
"At least at this point I'm optimistic we'll be able to prevent any cuts," says Charles "Chip" Kahn, president of the Federation of American Hospitals. "But I think it'll take some work."
On hospitals' side, however, are a couple of looming crises in Medicare. Because of how Medicare physician payments are calculated, doctors are suffering a 5.4% cut in their fees in fiscal 2002. Meanwhile, Medicare HMOs continue to exit the program, reducing beneficiaries' plan options in many markets across the country.
In addition, some oft-delayed payment cuts from the budget law-including a reduction in hospital teaching and disproportionate-share subsidies and a cut to home health rates-take effect this year without action by Congress.
Those factors and the approaching elections leave but a slight prospect of Medicare payment increases, Pollack says.