Medicare news ranges from bad to uncertain
ProPAC recommends no increase
There have been a variety of developments coming from Washington, DC lately for hospitals concerned about Medicare payments. Here’s a review:
• Medicare updates uncertain.
The Clinton administration and the Prospective Payment Assessment Commission (ProPAC), which advises Congress on Medicare Part A issues, are engaging in something resembling a good-cop, bad-cop routine. ProPAC announced it is recommending no increase in Medicare prospective payment system payments or capital payments for fiscal 1998. The panel reasoned that hospital Medicare margins were 7.9% in 1995, the highest they have been in a decade. Proprietary hospitals had the highest margins, 14.6%. The PPS is recommending a 2% increase for Medicare reimbursement for hospitals excluded from the PPS.
Reassurances from Clinton
However, the Clinton administration quickly assured hospitals that it will not seek to freeze reimbursement rates. Donna Shalala, secretary of Health and Human Services, told an American Hospital Association gathering that there will be an increase, but it will be somewhat less than the prices for hospital goods and services. Observers are predicting an increase of 1.5% less than those price increases, which are currently expected to be about 3%, leaving a "guess-at" increase of 1.5%. The rate increase approved last year was 0.5% below the price increases.
• Medigap premiums rising.
The rise in Medigap premium rates could result in hospitals struggling to collect more funds from elderly patients. When seniors carry Medigap, the co-insurance deductible is automatically piggy-backed to their Medigap insurer. If that policy is dropped, however, hospitals have to bill and collect from the patients. That would carry serious costs, including administrative, collection, and patient relationship hassles now that Medigap premiums have begun to soar.
Close to 75% of senior citizens now carry Medigap insurance policies to cover items such as deductibles or prescription drugs, says Ron Pollack, executive director of Families USA, a senior advocacy group in Washington, DC. But the ranks of those who can continue to carry it will likely decline, he predicts.
In California, for example, the annual premium for Prudential’s basic Medigap plan rose 37% in 1996, to $774. For its more generous Medigap plan, premiums increased by 39% to $1,614. With the average monthly Social Security benefits for a single person totaling $724, the new premium costs more than two months of Social Security checks.
In other states, Prudential’s increases ranged from 40% in Hawaii to 26% in South Carolina.
This comes as the elderly adjust to higher Medicare deductibles. Medicare Part A deductibles covering hospital stays rose by $24, from $736 in 1996 to $760 in 1997. Monthly Medicare Part B premiums are scheduled to rise by $1.30, or 3%, up to $43.80, effective Jan. 1, 1997. Seniors pay 25% of the cost of this premium.
• Medicare cutbacks chapter two.
The congressional free-for-all over Medicare spending is about to begin again, but indications are that Republicans and President Clinton may be somewhat closer to an agreement. Several key Republicans have reacted favorably to the White House’s new Medicare proposal, which calls for $138 million in cuts over six years.
Highlights of Clinton’s plan
Highlights of Clinton’s new plan include:
Extend the solvency of the Medicare Trust Fund to the year 2006.
Add Medigap protections, such as open enrollment and prohibitions against excluding recipients for pre-existing conditions. This is seen as a means of encouraging more seniors to move into Medicare managed care plans.
Reduce hospital updates and capital payments to save $45 billion over six years.
Create new provider service networks encouraging hospitals and physicians to establish their own health plans to compete against Medicare HMO.
Provide $11 billion over five years in direct payments to academic health centers. Money for this would come from eliminating medical education payments from the HMO reimbursement formula. Those funds would instead go to academic health centers gradually reducing HMO payment rates from the current 95% of fee-for-service programs to 90%. The reductions would not start until the year 2000 indirect savings from cuts in the traditional fee-for-service program.
Target $20 billion in savings over six years by creating a prospective payment system for home health.
Split home health care payments between Parts A and B. The first 100 home visits following a three-day hospital stay would be reimbursed by Part A. All other visits, including those not following hospitalization, would be reimbursed by Part B.
Add $1 billion over six years to improve rural health.
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