Congress offers billions in relief to hospitals, health plans
Health care can expect about $35 billion over five years
Congress’ lame-duck session ended on a positive note for hospitals, nursing homes, and health plans on Dec. 15 with legislation restoring about $35 billion in Medicare and Medicaid funding over five years; hospitals received about $11.55 billion.
The deal hinged on a compromise eventually reached between the White House and Capitol Hill. Its effect will be far-reaching, according to those who crafted the bill.
"This plan will help every Medicare beneficiary in America," says Rep. Bill Thomas (R-CA), a key architect of the legislation, in a statement. "We lowered out-of-pocket costs, and put more doctors in emergency rooms, more ambulances in rural areas, and more health aides in seniors’ homes."
At press time, President Clinton had indicated he would sign the bill.
The president of the American Hospital Association (AHA) in Chicago says he is pleased that lawmakers have acknowledged the needs of the elderly, the poor, the disabled, and the hospitals that serve them. Dick Davidson noted, however, that while lawmakers have provided one year of full inflation funding to cover the cost of caring for inpatients, "We would have preferred extending that adjustment for two years — with no further cuts."
Hospital and health system funds included in the Medicare, Medicaid, and State Children’s Health Insurance Program (SCHIP) Benefits Improvement and Protection Act of 2000 (BIPA) are broken down as follows, according to the AHA:
• $3.7 billion: Medicare payments will rise 3.4% in 2001, up from 2.3% from the Balanced Budget Act (BBA) of 1997. Estimates show prices rising by 3.05% in FY 2002, up from an estimated 2.5% under BBA.
• $900 million: Medicare outpatient payments will rise 4.4% in 2001, up from 2.5% under BBA.
• $700 million: Payment reductions for indirect medical education have been frozen at 6.5% for FY 2001 and FY 2002.
• $100 million: An additional 1% reduction in Medicare Disproportionate Share Hospital (DSH) payments has been eliminated in FY 2001 and FY 2002.
• $700 million: 55% to 70% increase in Medicare payments for bad debt.
• $300 million: Increase in floor payments for direct graduate medical education payments to 85% of the national average.
• $1.25 billion: Elimination of Medicaid DSH cut under BBA for FY 2001 and FY 2002 along with an increase in allotments in low-DSH states.
• $200 million: Removal of the 2% payment reduction for rehabilitation hospitals in FY 2002; they can move immediately to the prospective payment system.
• $1.35 billion: Medicare DSH payment eligibility equalized between rural and urban hospitals.
• $350 million: 3.2% rise in skilled nursing facility payments in FY 2001, with additional payments for nursing costs.
• $200 million: Change in rules for provider-based status by grandfathering existing provider-based entities for two years and adding geographic market area option.
• $625 million: Rural hospital improvements, including making the Medicare- dependent hospital program more equitable, updating the target amounts for sole community hospitals, increasing critical access hospital payments, and improving rural ambulance payments.
• $300 million: Long-term care hospital payments increase.
• $125 million: 5% increase in hospice payments for FY 2001.
• $525 million: One-year delay of 15% reduction in home health payments, full market basket for FY 2001.
• $150 million: 10% increase in rural home health agency payments.
• $25 million: Increased incentives for psychiatric hospitals.
• $50 million: Increased renal dialysis composite rate.
Additionally, BIPA provides $500 million for welfare-to-work Medicaid transition for another year, and $500 million for other entities, such as schools, to get qualified to enroll children in SCHIP and Medicaid.
In addition to BIPA, the omnibus package included $235 million to children’s teaching hospitals as part of the Health Resources and Services Administration’s funding, according to the National Association of Children’s hospitals.
While industry leaders lauded Congress for passing the spending bill, some say it still is not enough.
"The action today by Congress has halted the collapse of this [Medicare+Choice] program in key regions throughout the country. The task ahead is to solve the underfunding problem for all beneficiaries," says Karen Ignagni, president and CEO of The American Association of Health Plans in Washington, DC.
The House had passed BIPA last October, but the White House threatened a veto. The White House said health plans received too much money from the legislation.
The objection was dropped when Republicans agreed to increase the funding of the bill by $2.7 billion. Of that $2.7 billion, about $1.7 billion will go to teaching hospitals, rural hospitals, and hospices, and to waive the two years that patients with Lou Gehrig’s disease must wait before becoming eligible for Medicare coverage. The other $1 billion will be used to provide expanded health coverage for low-income children and to extend provisions allowing families to keep Medicaid coverage for a year when moving from welfare to work.
The Clinton administration had also wanted to require manage care health plans to commit to multi-year contracts with the program. While this did not make it into the final legislation, the administration did win the right to levy increased civil penalties against plans that drop out between enrollment periods, leaving beneficiaries temporarily without coverage.
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