New Medicare and Medicaid spending forecasts may translate to fewer dollars for hospitals. Last week, the Congressional Budget Office said Medicare spending is projected to grow to $325 billion for fiscal 2005, which began Oct. 1, 2004, up 9.4% from $297 billion for fiscal 2004. The new figures led some experts to predict Medicare reimbursements to hospitals may be cut in 2006.
For hospitals, the figures come at a time when the prognosis on reimbursements is getting increasingly gloomy. Earlier this month, the Medicare Payment Advisory Commission recommended increasing reimbursements to hospitals for 2006 less than the rate of inflation, which drew the ire of the hospital industry (Jan. 17, p. 8).
"This on top of (MedPAC's) recommendations enhances the likelihood there will be proposals to cut Medicare," said Chris Jennings, a healthcare consultant and a former senior healthcare adviser to the Clinton administration.
Overall, the CBO estimated that the federal deficit would fall to $368 billion in fiscal 2005, down 10.7% from $412 billion in fiscal 2004. The figure does not include spending on Iraq. The CBO is a nonpartisan independent agency that provides members of Congress with budget and economic projections.
Separately, White House officials told reporters last week that their own projections show the deficit would reach a record $427 billion for the current fiscal year, including President Bush's request of an additional $80 billion for funding in Iraq.
American Hospital Association officials were not available to comment on the CBO report, an AHA spokeswoman said.
Fiscal conservatives in Congress are calling for budget constraints, and if spending cuts do occur, domestic programs such as Medicare and Medicaid are in danger of being slashed. Some experts, including Jennings, said the CBO report could result in cuts beyond what MedPAC recommended earlier this month.
Alec Vachon, president of consulting firm Hamilton PPB, said the president's budget proposal for fiscal 2006, set to be released Feb. 7, will likely determine whether there will be Medicare reimbursement cuts. In the past, Congress' fiscal conservatives held enough sway to force deficit reduction even if the White House tilted away from such action, he said, but the Republican leadership today isn't necessarily focused on reining in spending.
"I think White House leadership on aggressive Medicare savings is essential," Vachon said.
The CBO report also noted that the new Medicare drug benefit, which begins Jan. 1, 2006, is expected to increase spending by $47 billion in 2006 and reach $174 billion in 2015, when it will make up 23% of the $766 billion in total Medicare spending. Medicaid spending is expected to reach $186 billion in fiscal 2005, up from $176 billion during fiscal 2004. By 2015, the Medicaid spending figure will climb to $392 billion, the report said.
Given the $427 billion deficit projected by the White House, many are saying the administration and Congress will have no choice but to tackle the issue. Last week, Bush may have offered a glimpse into his upcoming budget request for 2006.
"We look forward to working to hold the line with the United States Congress on spending," he said at a news conference. "And as I say, I'll promote a package that will show the budget (deficit) being cut in half over the next five years."