February 5, 1999

President Proposes Expanding Coverage to the Uninsured While Cutting Provider Payments, Imposing Additional Provider Fees

The president's FY 2000 health care budget sends a bittersweet message to providers. While proposing to expand health care coverage to various uninsured populations, Clinton's budget also includes provider payments cuts and new provider assessments to help pay for such health care initiatives.

Specifically, the president's health care coverage initiatives include:

• enabling people aged 55-65 to buy into Medicare, particularly those who have involuntarily lost their jobs and health insurance;

• providing Americans over 55, whose companies terminate their retiree health coverage, a new insurance option by extending COBRA continuation coverage until age 65;

• extending Medicare and Medicaid coverage to disabled individuals who return to work;

• extending Medicaid coverage to low-income children up to age 21 who were in foster care but left the system at age 18;

• allowing states for extend Medicaid to pregnant qualified aliens, qualified children or those immigrants with restored SSI benefits; and

• a $1 billion new public health initiative to improve "increase the capacity and effectiveness of the Nation's health care safety-net" in caring for the uninsured. Specifically, the initiative would encouraging collaboration between primary care providers and hospitals to assist them in delivering health care to the underinsured. Approximately 100 grants to communities would be given.

While the president proposed in his State of the Union address to use a portion of the budget surplus to extend the life the Medicare trust fund, no such provisions were included in his formal budget. Instead, the president included several Medicare cuts or "savings" to providers, to the tune of $9 billion over five years. Measures include:

• not updating the hospital payment rates for FY 2000;

• reducing from 55 to 45 the percentage Medicare pays hospitals for bad debt and extending this policy to provider beyond hospitals;

• reducing the lab fee schedule ceiling from 74 to 72 percent;

• limiting Medicare payments for orthotics and prosthetics to the national median;

• reducing Medicare's reimbursement rate for Epogen by $1;

• requiring contractors to demand secondary payer data;

• reducing Medicare drug payments; and

• clarifying partial hospitalization benefits

In addition, the budget also includes $194.5 million in new user fees to finance HCFA's administrative budget. Examples of provider user fees include assessments for filing paper and duplicate claims, survey and certification, and provider registration fees.

In another bittersweet offering to providers, the president includes $40 million new initiative included in funding for health professions programs to help support GME programs at children's hospitals. However, grant money for primary care medicine and dentistry, which received $80 million last year, was zeroed out.

While the AAMC applauds the President's effort to expand coverage to those at-risk or underinsured individuals, the AAMC strongly opposes additional Medicare or Medicaid provider cuts to those already enacted in the Balanced Budget Act. In addition, the AAMC also opposes additional fees or assessments, the so-called user fees.

Information: Lynne Davis, AAMC Office of Governmental Relations, 202-828-0526.