A victory for the Senate Finance Committee and its hardworking chairman could spell defeat for hospitals under a healthcare reform package expected to clear a major hurdle this week.
A loss for hospitals?
Senate package could negate deal with key groups
After months of closed-door negotiations, a legislative package drafted by Sen. Max Baucus (D-Mont.) landed the equivalent of a green light from congressional actuaries, who found that the bill would cost $829 billion and cover 94% of Americans after a decade's time. “This is very good news,” Baucus said. “I'm very pleased.” The committee is expected to approve the bill this week, sending it to a handful of senators who will then meld it with legislation already passed in July.
But the hospital sector, which has largely supported reform efforts on Capitol Hill, is less than thrilled. In July, the American Hospital Association, Catholic Health Association and Federation of American Hospitals hammered out a deal with Baucus and the White House that would trade $155 billion in federal pay cuts for certain protections against future regulation that could potentially be even more damaging.
That deal, however, is on crutches after the Congressional Budget Office estimated that about 25 million people would remain uninsured even under a reformed healthcare system. In a letter released to Baucus on Oct. 7, the CBO said that after 10 years, roughly 9% of the U.S. population—including those who are here illegally—would continue to go without coverage. Taken separately, the CBO predicts only 6% of actual U.S. citizens would remain uncovered.
Put another way, the Baucus reform blueprint would extend coverage to 91% of everyone living in the U.S., and 94% of the country's legal citizens. The deal shaped by the hospital associations, however, was based on having 94% of all residents, or 97% of legal citizens, covered—several percentage points off from the CBO's predictions. “This is a major problem that has to be dealt with,” said FAH President and CEO Chip Kahn.
The associations agreed to take cuts in exchange for protection from decisions made by an enhanced Medicare advisory panel, lighter penalties on hospital readmissions and tougher language that stunts the growth of physician-owned hospitals. Roughly $50 billion of that would come from federal subsidies that hospitals use to offset the amount of uncompensated care they incur each year.
The most recent CBO projections are relatively unchanged from earlier ones that also left the hospital sector unsettled. “This is the most important issue for us,” Kahn said.
Kahn and other hospital industry representatives said that there is still time to boost coverage in the Finance package—and neither party has suggested that the deal is dead. Several more steps remain in the legislative process, and each one of them represents another chance for the industry to press its case to lawmakers and legislative staff.
Kahn said the groups involved would continue to work with lawmakers to find ways to further extend coverage, though it's more likely such changes would come once the bill moves to the Senate floor. One way to do so would be to increase the amount of federal subsidies the government plans to use to help make coverage more affordable, Kahn said. The CBO has said that the bill would reduce the federal deficit by about $81 billion, and Kahn and other hospital executives said that some of that money could go toward shoring up coverage.
According to data collected by the AHA, hospitals incurred $34 billion in uncompensated care in 2007, roughly 5.8% of their total expenses. What's more, the data show that the dollar amount is on the rise. Over that time, federal disproportionate-share hospital payments have also increased. In 2007, federal DSH payments tallied 8.8% of the $105 billion Medicare paid to inpatient hospitals, according to the Medicare Payment Advisory Commission.
The hospital deal aside, the CBO numbers are seen by many as a remarkable achievement for Baucus. The $829 billion is offset, in part, by about $201 billion in new revenue from an excise tax on high-premium health insurance plans and $110 billion in net savings from other areas. As written, the Baucus bill expands coverage to nearly every American, creates an open insurance market called an exchange, expands the eligibility of Medicaid, and puts into place dramatic changes in how care is delivered and paid for across the country. The CBO said that the legislative package would result in a net reduction in the federal deficit of $81 billion over the next decade.
The bill, however, would reduce payments to just about every provider group, saving about $162 billion from Medicare, and creates a new competitive-bidding platform for the Medicare Advantage program. Congressional accountants have said the Medicare Advantage changes would yield some $117 billion in savings. Sen. Olympia Snowe, a moderate Republican from Maine who Baucus and other committee Democrats have courted for support, said she has put a lot of stock in the CBO numbers. “How it comes out has a material impact on my vote and, I'm sure, many others on the committee.”
Still, some senators are leery of the numbers. “I don't know if outside of the Beltway people would believe those numbers,” said Sen. Ben Nelson (D-Neb.), who is largely seen as being on the fence when it comes to the package.
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