Medicare budget increase not recommended
Issue falls in lap of Congress
Hospitals hoping for extra Medicare payments to boost their bottom lines apparently may have to look elsewhere. U.S. Secretary of Health and Human Services Donna E. Shalala is recommending no payment increase for hospitals in the next federal budget year.
Under current law, Medicare payments to hospitals would be based on a "market basket" index and would increase 2.8% in fiscal year 1998. Congress will have to decide whether to allow that increase, or adopt Shalala’s recommendation. Her plan is part of the Clinton Administration’s effort to reduce growth in Medicare spending by a total of $115 billion over the next five years. Medicare savings are one element of the bipartisan plan for a balanced budget in fiscal year 2002.
"Medicare must become an increasingly prudent purchaser of health care services, and those who provide services to Medicare beneficiaries must do their fair share toward a balanced federal budget by increasing their efficiency and effectiveness," Shalala said in announcing her recommendation.
Earlier this year, the Prospective Payment Assessment Commission also recommended a freeze on Medicare payment rates for hospitals in the coming fiscal year. In its March 1 report, the commission said a zero update "reflects projected inflation in the prices of hospital inputs and the commission’s judgments about the likely effects of scientific and technological advances, productivity improvements and service changes, and changes in the mix of patients treated."
Current law requires that the rate increases for PPS hospitals be based on projections of growth in the prices of goods and services purchased by hospitals, known as the hospital market basket. The market basket is currently estimated to increase 2.8% for fiscal year 1998. The increase for nonacute care hospitals is based on an estimated 2.8% rise in the market basket calculated exclusively for these PPS-excluded hospitals.
Failing congressional action to put in place Shalala’s recommendation for a payment freeze, the 2.8% increase would take effect Oct. 1 for the nation’s 5,200 short-stay, acute care hospitals participating in Medicare and for 2,000 nonacute care hospitals psychiatric, rehabilitation, long-term, and children’s facilities.
Also included in the proposed regulation is a 0.11% decrease in the federal capital PPS rate Medicare payments to hospitals for capital-related costs. The covered costs include depreciation, interest, taxes, insurance and similar expenses for plant and equipment.
Medicare paid $81.9 billion to inpatient hospitals providing acute, short-term care in fiscal year 1996. Under Shalala’s proposal, hospital payments are expected to grow by 6.4% from $85.7 billion in fiscal year 1997 to $91.2 billion in fiscal year 1998.
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