Healthcare providers are skeptical that the Bush administration and Congress will be able to drum up a viable funding source to pay for a fix to Medicares physician formula, one of HHS goals for the year.
In announcing the departments agenda for 2008, HHS Secretary Mike Leavitt last week ruled out Medicare Advantage as an option for funding a change to the system that would increase Medicare payments to physicians, and President Bush has indicated hes against a tobacco tax as a funding source. That leaves hospitals wondering if their payments will be the next obvious choice to fill a hole that Leavitt said is getting bigger each year.
But Chip Kahn, president of the Federation of American Hospitals, doesnt think so. Its really unlikely the Hill is going to accept the presidents budget if theres deep cuts to hospitals to pay for a Medicare physician fix, Kahn said.
Leavitt cited fixing the Medicares sustainable growth ratethe formula thats tied to growth in the economy and determines payments for physicians each yearalong with launching a health information technology adoption demonstration in physician practices and driving healthcare innovation in local communities, as his top priorities in 2008. The physician payment fix, however, has more urgency than the other issues, perhaps since a 10% cut to Medicare payments is scheduled to take effect in July.
The reality is, in 2009 were staring down the barrel of a 15% reduction, and in 2010, 20%, Leavitt told reporters, referring to the SGR formula. The 15% cut Leavitt spoke of for 2009 reflects the 10% cut that would go into effect on July 1, provided that Congress doesnt come up with another temporary fix, plus an additional 5% cut on Jan. 1, 2009.
We cannot go on patching this on a six-month by six-month basis, Leavitt said, adding that a more permanent solution was needed. Part of the solution, he said, is having a system that begins to reward quality, not just volume. But he also stressed that cutting into funding for Medicare Advantagestill a favorable option for many beneficiariesshould not be used as a paygo mechanism to fund expansions of other programs.
Making a change in how Medicare pays doctors is a concern for many in the industry. Clearly the SGR needs to be fixed, said Richard Umbdenstock, president and chief executive officer of the American Hospital Association. While he hasnt seen any specific proposal that would target hospitals as a funding mechanism, Umbdenstock noted that the AHA is always concerned about any attempt to solve one problem at the expense of another party.
The calculation of the SGR since 2002 would cut payments to physicians, and over the years has been deflected by congressional interventions that call for minimal or no increase to physician reimbursement. Congress in late 2007 issued a temporary measure to stop a scheduled 10% cut to payments this year, but that measure expires June 30 (Jan. 7, 2008, p. 32).
The American College of Physicians would welcome the Bush administration stepping up and issuing a proposal in its budget in fiscal 2009 to address the SGR problem, in the long and short term, said Richard Trachtman, the American College of Physicians director of legislative affairs. HHS would need to come up with an offset, however, Trachtman said. Id be very curious on what it might be.
Cognizant of the distractions and short calendar that comes with a presidential election year, Capitol Hill appears to be working on some early solutions. In his meeting with reporters, Leavitt suggested that the SGR problem might be addressed in the presidents fiscal 2009 budget request for HHS, expected to be released the first week in February.
But he acknowledged that a formula fix would not come easily or cheaply. The Congressional Budget Office has estimated that replacing the SGR with annual updates based on inflation would cost the federal government $262 billion over 10 years, plus $70 billion in higher costs for beneficiaries, unless they were shielded from the impact. In Congress, there were rumblings in the news last week that the Senate Finance Committee might be working on a fee schedule fix that could cost upward of $12 billion to $15 billion. Calls to aides on the finance panel were not returned.
Theres just one problem with that approach: The Senate Finance Committee doesnt have $12 (billion) to $15 billion to carry out what is supposed to be an 18-month SGR fix, said Alexander Vachon, a healthcare consultant in Washington. The only thing people seem to agree on is not using hospitals, Medicare Advantage, nursing homes and home health to come up with the money, Vachon said. As for the tobacco tax, the president opposes that approach, and the Democrats believe a tobacco offset belongs to the State Childrens Health Insurance Program, he said.
Hospitals on the inpatient side are losing money on Medicare, Kahn said. Thats not the situation with Medicare Advantage. I dont know why the administration, who wants to curb growth in Medicare costs, wants to maintain Medicare Advantage at current levels.
HHS also will be striving to encourage health IT in physician practices. Leavitt in his meeting said the department will be recruiting 1,200 practices this year to apply for its new IT demonstration project.
In addition, the department plans to meet all of the 16 objectives of its 1,000 day plan on health IT by the end of 2008, said Karen Bell, director of HHS Office of Health IT Adoption, in the Office of the National Coordinator for Health Information Technology. The plan was initiated in May 2006 as a management tool by Leavitt to help advance the larger goal of having the majority of Americans acquire electronic health records by 2014, Bell said.