Hospitals, Lawmakers Try to Stop Looming Medicare Cuts

A "broad alliance" of politicians, hospital administrators, physicians and union leaders is trying to "head off" two scheduled reductions in Medicare payments resulting from the 1997 Balanced Budget Act that they say would have a crippling effect on hospital services, particularly on the nation's teaching facilities, the New York Times reports. The first of the two cuts, which industry officials say will result in a combined $1.6 billion annual loss for the nation's hospitals, will go into effect in October 2002 and will reduce the indirect medical education payments that teaching hospitals receive for performing "specialized, high cost care," such as cancer therapies, burn treatment and cardiac care. According to the Greater New York Hospital Association, this cut will result in a roughly $735 million annual loss nationwide for teaching hospitals, including $130 million to New York state's teaching facilities. Under the second cost-cutting measure, scheduled to take effect on Oct. 1, HCFA will change its formula for factoring inflation into reimbursement rates, as the agency will "determine the rate of inflation for hospitals and subtract half a percentage point to arrive" at the new rate. According to the association, this change will result in a $420 million nationwide loss for the rest of the year and about $850 million next year. New York hospitals will lose about $36 million a year initially, "growing to nearly $80 million annually by next year."

The prospect of these losses, which would lead to more crowded hospitals and "higher charges to private insurers and to patients," has fostered a bipartisan campaign to block the cuts. Opponents of the cuts point out that while the BBA called for reducing Medicare spending by $115 billion by 2003, hospitals have already seen payment reductions in excess of $200 billion. Senator Kay Bailey Hutchinson (R-Texas) has introduced a bill (S. 839) to "reverse the cuts," and has the backing of "several Democratic senators" and "several Republican senators." In announcing the bill, Hutchinson said that teaching hospitals "are not only educating and training the next generation of physicians and other health care professionals, but in many communities, they are the primary providers of medical services to the poor and indigent. Our society cannot afford to shortchange them." Proponents of maintaining current levels of Medicare funding, however, are one of several interest groups "scramb[ling] to claim a portion of the federal budget surplus, and the Times reports that Hutchinson's bill must be navigated through a Congress "preoccupied with other matters," including tax cuts. Dan Sisto, president of the Healthcare Association of New York State, said, "We recognize that some of the budget surplus will go for tax cuts and education and defense. But health care must be an equivalent national priority now that the surplus is being divided up" (Hernandez, New York Times, 5/14).