The nation's seniors won a significant battle last week when a Senate panel for the first time in its history approved a bill that would add an outpatient drug benefit to Medicare. For healthcare providers the potential victories were much less clear in the fog of legislative battle.
Under the $399 billion package approved 16-5 by the Senate Finance Committee, rural providers would see $25 billion in payment increases over the next 10 years. The Senate bill would not address overall hospital payment rates, but as the Finance Committee neared its vote last week, House Republicans came out with a plan that would be less generous to rural hospitals and update overall hospital payments next year at a rate below inflation.
The full Senate is expected to debate its bill this week and leaders expect it to pass the chamber before July 4. Also this week, the House will convene committee meetings on its Medicare reform bill.
Under the nascent House bill, payments to hospitals would increase 3.08% next year, or 0.4 percentage points below full inflation, according to House Ways and Means Committee Chairman Bill Thomas (R-Calif.), who said that rate is in line with recommendations by the Medicare Payment Advisory Commission.
"For hospitals anything less than inflation in a situation in which we're already being paid less than the cost of service is a deep disappointment," said Rick Pollack, executive vice president of the American Hospital Association, which will continue to lobby on behalf of a more favorable rate. Thomas also told reporters that lawmakers need to "adjust the arbitrary and unrealistic parts of the formula" used to calculate physician payments. The House bill would increase Medicare payments to doctors by 1.5% in both 2004 and 2005 until the formula adjustments kick in, according to Ways and Means aides. Currently, physicians are slated to see their payments drop by 4.2% in 2004.
Thomas said that once these corrections are made, "to the degree we've got it right, doctors are going to have to learn to live with it."
Pollack and others cautioned that the House plan, which is likely to include $15 billion in aid to rural providers, has yet to be released as official legislation, so it is shy on the details necessary to make more informed judgments. Lawmakers have not specified, for instance, how many years they would give hospitals an update below inflation.
Last summer, Congress fought a bruising series of battles when the House passed a bill to modernize Medicare, but the Senate rejected four different proposals. Members of both chambers-and both parties-were anxious this time around to agree on legislation that could reach President Bush's desk.
"What a difference a year makes," Sen. Orrin Hatch (R-Utah) said in his introductory remarks to the Finance Committee last week. "This is a historic day for the Senate Finance Committee and the Senate as a whole."
President Bush himself threw his weight behind Medicare reform in speeches in Chicago and New Britain, Conn., saying the time is ripe for Congress to pass a drug benefit and update the 38-year-old entitlement program.
Sen. John Breaux of Louisiana, the Democrat on last year's "tripartisan" group of Medicare reformers, successfully added to the Senate bill an amendment that would prohibit physicians from owning a stake in hospitals devoted exclusively to cardiac, orthopedic, surgical and other specialty care.
A General Accounting Office report issued in May concluded that the number of specialty hospitals has tripled since 1990; patients at the niche providers were less sick than those at general hospitals; and about 70% of the facilities had some physician owners.
The AHA's Pollack said the hospital community is "pleased" the Breaux amendment passed.
Finance Committee Chairman Charles Grassley (R-Iowa), a chief architect of the legislation his committee approved last week, included in the bill provisions that would permanently equalize Medicare's base payment rate to urban and rural hospitals; adjust the wage index to more accurately reflect labor costs; boost payments by as much as 25% to some low-volume hospitals; increase disproportionate-share payments to rural hospitals and ease the criteria to qualify for cost-based reimbursement under the critical-access hospital program. Also, certain border hospitals that provide care to illegal immigrants would receive $1 billion over five years to offset those costs.
To offset the cost of the rural payment changes, the bill would freeze for seven years all increases in durable medical equipment payments.
According to Thomas aides, the House bill would pay critical-access hospitals 2% more than their costs and implement a 5% add-on payment for rural home health providers. Like the Senate bill, the House bill would equalize the base payment rate to rural and urban hospitals.
The bulk of last week's discussions, in the Finance Committee and press briefings with congressional aides, focused on the administration of a drug benefit under a reformed Medicare program. The Senate and House proposals adopted the Bush concept of providing a private managed-care plan alternative to traditional Medicare. The Bush administration's plan would have enticed seniors into the managed-care plans with richer drug benefits, but Congress wasn't willing to go quite that far and kept the benefit equal for all beneficiaries. Still, some Democrats expressed concern that using private managed-care plans at all is a bad deal for seniors and won't necessarily be more economical and efficient than Medicare already is.
The Senate bill approved last week "takes us in a direction that by definition will cost more money to administer," said Sen. Debbie Stabenow (D-Mich.), standing next to Senate Minority Leader Tom Daschle of South Dakota, at a Capitol Hill press conference. Daschle, a member of the Finance Committee, voted in favor of the bill.