Healthcare lobbyists for more than a dozen interest groups, some of which have battled on opposite sides in the past, found common ground last week in their near-unanimous opposition to the White House’s proposed fiscal 2008 healthcare budget.
Indeed, groups that have at times publicly stated unity but privately gone after their own interests were of one voice as they attacked the Bush administration for a budget that they said would choke off needed dollars to fund medical education and would limit hospital care to the young, old, rich and poor.
"It’s just a hatchet" job, said Bruce Yarwood, president and chief executive officer of the American Health Care Association.
"Pennywise but pound foolish," is how Val Halamandaris, president of the National Association for Home Care & Hospice, described the budget. A "remarkable leap backward to the stone age of healthcare," Daniel Sisto, president of the Healthcare Association of New York State, offered.
You’d have to go back a full 12 months—when the administration released its last federal budget—to find such consensus between hospitals, physicians, home health and long-term-care providers.
Noticeably quiet were groups representing the insurance industry. The proposed budget is widely seen as being favorable to health plans, with provisions meant to expand the ranks of the covered while keeping plans under the Medicare Advantage program, or Part C, untouched.
Calls to America’s Health Insurance Plans were not returned by deadline.
Nonetheless, widespread rejection of the proposal spells bad news for President Bush’s $2.9 trillion budget blueprint—$700 billion of which would go to HHS, largely to fund its Medicare and Medicaid entitlement programs.
Without Congress’ support, the proposals are unlikely to be adopted. Instead, Congress is likely to come up with alternative appropriation plans. The budget officially landed on Capitol Hill Feb. 5, just a week after federal lawmakers came to an agreement on nine appropriation bills that were needed to fund many of the government’s departments for 2007.
For the healthcare sector, the budget is a mixed bag of give and take. On one level, the White House has proposed spending $212.28 billion on hospitals through Medicare Part A, a 4.8% increase of $9.73 billion from 2007 funding levels; $181.64 billion for physician and outpatient services through Medicare Part B, a 4.5% increase of $7.74 billion from 2007; and $60.11 billion for its prescription drug benefit through Medicare Part D, a 22.2% increase of $10.94 billion.
Medicare managed-care programs would get an estimated $84 billion. The CMS estimated that Medicare Part D payments would decrease by $15.2 billion over five years under Bush’s budget, according to a CMS spokesman. Part C wasn’t broken out in the budget summary because there were no proposals from Bush to cut it, according to the CMS.
All told, the president’s request to fund HHS is $28 billion more than last year, or up 4.2%, according to an HHS news release.
But the industry likely won’t remember this budget for the proposed extra funding, but rather for a series of legislative and regulatory initiatives designed to shave more than $100 billion from the Medicare and Medicaid programs in five years’ time—$76 billion of that from Medicare and $26 billion from Medicaid. While the federal government called the move a way to save money for those two goliaths of spending, Big Healthcare—the hospitals, doctors, nurses and others that make the system run—call it a cut, and have bonded together to fight them.
At the heart of the reductions is a legislative proposal that would cut 0.65 percentage points from Medicare’s annual inflationary increases—dollars that hospitals depend on to keep pace with the economy as a whole. For hospitals alone, Medicare expects that provision to save $13.79 billion over five years. What’s more, that reduction would remain in effect far past the five-year projection of the budget, meaning hospitals would have to adjust long past 2012.
But the decrease in spending also taps other providers as well. Particularly on the hot seat are skilled-nursing facilities, inpatient rehabilitation and home health providers, which on top of the 0.65 percentage point cut wouldn’t see an increase to the marketbasket, or inflation, update either. Taken as a whole, spending restraints are expected to shave $20.8 billion over five years from those federally funded programs. Pay cuts for hospice services and ambulatory surgery centers also follow the same tack, resulting in reduced five-year spending of $1.14 billion and $90 million, respectively.
All told, HHS said it expects to save close to $40 billion over five years from moves intended to slow the growth of the Medicare program.
A slate of other legislative proposals, including the elimination of hospital medical education payments for Medicare Advantage beneficiaries; a moratorium on payments for so-called "never events"; a four-year phase-out of Medicare bad debt; and rental caps on both power wheelchairs and home oxygen would pile on another $11.48 billion in savings over five years.
In the aggregate, the budget projects $65.61 billion in Medicare savings over five years from its legislative proposals, and another $10.2 billion in regulatory proposals that don’t need congressional approval.
While each particular sector has to worry about its own line items in the budget, hospitals are one of the few groups directly affected by each of the cuts, said Kenneth Raske, president and chief executive officer of the Greater New York Hospital Association. Add in recently proposed CMS regulations, and hospitals in the Empire State stand to lose $1.1 billion in federal funding in 2008.
"It would cripple the ability of many New York hospitals to deliver care in a high-quality fashion," he said, adding that medical staffing and physician training would be greatly reduced, in turn swelling the emergency departments with patients. "The assault by the president on healthcare is one of the worst assaults I have ever witnessed. It absolutely guts payments to hospitals that supply a large level of care to the elderly and the poor."
To be sure, those cuts that need the approval of Congress likely won’t see the light of day. Last year, the administration sent a proposed $36 billion in cuts to Medicare over five years to a Republican-led Congress, which roundly squashed them. There’s even less of a chance that the new Democratic majority would approve the proposed budget—especially since some proposals cut into their core healthcare agenda.
Even so, health policy analysts remain fixated on a slate of regulatory proposals that would sidestep Capitol Hill altogether. Under the Medicaid side of the ledger, almost half of the administration’s savings—$12.71 billion—would come from the issuance of regulations vs. $13 billion in legislative proposals.
Among those targeted Medicaid cuts are some that would have the deepest impact and put the most direct financial burden on hospitals—and potentially carry with them a longer-term fiscal wallop.
Of primary concern is a provision that targets teaching hospitals, but would also have an effect on every level of care. The budget proposes to end Medicaid graduate medical education payments as a way to save $1.78 billion over five years.
The graduate and indirect medical education payments are parts of the overall formula CMS uses to pay teaching hospitals. Both are part of a complicated payment equation based on the premise that teaching hospitals tend to get tougher medical cases and by their very nature are generally less-efficient than other hospitals.
At 1,002-bed Montefiore Medical Center in Bronx, N.Y., that provision alone would result in losses of $50 million a year, said Spencer Foreman, the center’s long-time president. He said the cuts would "devastate" his hospital’s ability to train and retain physicians. "We take a clobbering with the Bush administration proposal," he said.
Raske said that he challenges whether the administration has the authority to deem some of the provisions regulatory rather than legislative—and said he would sue the government if they went forward with them.
The president’s budget blueprint illustrates the dotted line that connects all of America’s hospitals and healthcare providers—from those in the richest communities to those in the poorest. In interviews, hospital executives talked about a ripple effect that occurs when a single general hospital, for instance, is hamstrung in its ability to provide care for a patient. In many cases, that patient falls through the system’s cracks that otherwise wouldn’t be there if the organization was fully funded, they said.
Often, the trickle down affects the nation’s safety net hospitals and the emergency departments in urban areas, said Dan Hawkins, vice president of federal, state and public affairs at the National Association of Community Health Centers. Hawkins said that at least 35 million people across the country do not have a "healthcare home" or a personal physician.In turn, that means that those individuals seldom get care when it makes the most sense—before or at the beginning stages of an ailment. "These are the people who end up in the emergency room for conditions that, if only treated earlier in an ambulatory setting, wouldn’t be there in the first place," he said.
During his annual State of the Union Address, Bush touted two initiatives designed to prompt Americans into buying health insurance. One initiative would reform the tax code to give Americans a tax break that would be used to purchase coverage in the open markets.
Yet another hurdle is the priority to fund the State Children’s Health Insurance Program about three times more than currently projected in the budget, which allots $5 billion, plus shuffles around dollars that have yet to be spent by some states. SCHIP, which is up for reauthorization this year, would cost federal lawmakers up to $15 billion more, money again that would have to be rejiggered from other programs.
It’s unlikely that federal lawmakers will accept the legislative initiatives proposed in the budget. Last week, Democratic members of both the House and Senate assailed the budget, providing the biggest hint yet that the budget will get the thumbs down.
Even so, the American Hospital Association and others said they would double down in their efforts to scuttle the proposals. "We have to take it seriously," said AHA Executive Vice President Richard Pollack. The AHA and other members of the Coalition to Protect America’s Health Care began a radio, television and newspaper ad-blitz meant to pressure Congress into voting down the administration’s proposals.
One of the ads features "Emily," a premature baby, and tells of the challenges she faces because she was born early. Another focuses on an octogenarian who suffered a heart attack. "But even a heart of gold can fail," the ad declares. "Luckily, when it happened to Burt, a hospital was nearby."
But HHS officials made their case for the budget last week on Capitol Hill. "The overall focus of the budget for both our programs in making them work better is to provide high quality care at low prices, achieving efficiency and facilitating informed consumers," said Acting CMS Administrator Leslie Norwalk, at the news conference unveiling HHS’ portion of Bush’s budget.
HHS Secretary Mike Leavitt later in the week defended the cost-saving provisions to members of the House and Senate committees that have jurisdiction over Medicare and Medicaid. Leavitt called the budget "aggressive yet responsible," and said that its crafting proved difficult at a time when the goal has been set to balance the budget by 2012. "I will be frank with you," he told members of the House Energy and Commerce Committee on Feb. 6. "There will never be enough money to satisfy all wants and needs, and we had to make some tough choices."
Leavitt said that the budget includes legislative and administrative proposals that would encourage more efficient payment for services, foster competition and promote beneficiary involvement in their healthcare decisions. House and Senate GOP members often backed Leavitt, but the Democrats, now in the majority, clearly relished having the secretary in their sights.
In one back-and-forth, Leavitt and the formidable Energy and Commerce Committee chairman, John Dingell (D-Mich.), sparred over SCHIP funding numbers, which the congressman thought were too low to provide adequate coverage."In other words, Mr. Secretary," Dingell said, regarding the healthcare budget, "you are advising us to pray."