AAMC Documents:
Medicare IME
Medicare PPS
Medicaid DSH
| |
|
America's Teaching Hospitals Still Hurt from the BBA
Current Status as of April 21, 2000
The Balanced Budget Act of 1997 (BBA) made significant changes to the
Medicare and Medicaid programs, reducing spending for both programs by
$116 billion and $15 billion respectively from 1998 to 2002. The actual
spending reductions turned out to be much higher for a variety of reasons.
A significant portion of that reduced spending is in the form of decreased
payments to hospitals. The BBA's changes to Medicare and Medicaid provider
payments include reductions in payments that reimburse all hospitals and
payments that specifically reimburse teaching hospitals for their special
missions, including training the nation's future physicians and caring for
low income Medicare, Medicaid and indigent populations. Despite Congress'
efforts last year to restore a portion of the BBA's Medicare and Medicaid
payment cuts to providers, the BBA continues to threaten the ability of
teaching hospitals to finance their special patient care, research and
education missions. Teaching hospitals still hurt from the BBA.
The BBA and BBRA
While Medicare and Medicaid continue to provide financial support to
teaching hospitals for their missions to educate the nation's doctors,
treat the most severely ill patients, care for the poor and uninsured, and
provide important community and regional services, the BBA contains
significant changes for teaching hospitals. Chief among these changes are
legislative provisions affecting all hospitals-- $17 billion in reductions
to the inflation updates for Medicare patient service payments and $10
billion in Medicaid Disproportionate Share Hospital (DSH) payments
reductions from 1998 to 2002. In addition, teaching hospitals are affected
by reductions in Medicare payments that reimburse teaching hospitals for
the higher costs associated with a teaching environment. Specifically, the
BBA reduced the Medicare Indirect Medical Education (IME) adjustment by 29
percent over four years, from 7.7 percent in 1997 to 7.0 percent in 1998;
6.5 percent in 1999; 6.0 percent in 2000; and 5.5 percent in 2001.
As a result of considerable efforts by members of the AAMC teaching
hospital community together with the American Hospital Association and
other organizations, Congress acknowledged that the BBA and its payment
reductions created unintended consequences for health care providers and
passed the Balanced Budget Refinement Act (BBRA). This legislation
increases Medicare and Medicaid spending by approximately $16 billion over
five years, with approximately $7 billion directed to hospitals. For
teaching hospitals, the BBRA delays the implementation of the 29 percent
cut in IME payments by one year, maintaining IME payments at 6.5 percent
in FY 2000 before reducing IME to 6.25 percent in FY 2001 and to 5.5
percent in FY 2002. The IME reduction still represents the second largest
inpatient payment cut for teaching hospitals after the reduction in
inflation updates to patient service updates.
The Financial Impact of the BBA and BBRA
While the BBRA is an important first step, it represents only 10
percent of what the BBA was originally estimated to save. According to
AAMC estimates, the BBRA will increase Medicare payments to the typical
AAMC member teaching hospitals by only 6 percent. The typical member
teaching hospital will still lose over $40 million between 1998 and 2002,
even with the enactment of the BBRA. Total margins will continue to
decline by over half from 4 percent in 1998 to 1.6 percent in 2002.
The AAMC continues to be concerned that the BBA's significant Medicare
and Medicaid payment reductions--along with a highly competitive
marketplace that is reducing private payer reimbursements to teaching
hospitals--will undermine the ability of teaching hospitals to support
their education, patient care and research missions. Many teaching
hospitals have already announced major financial downturns. In addition,
teaching hospitals in every region of the nation continue to consider
scaling back key community hospital services, programs for the uninsured,
clinical research activities and education and training for medical
students and residents. The BBA's reduced payments are also not keeping
pace with the costs and demands of patient care at teaching hospitals. As
teaching hospitals provide the most advanced care with cutting edge
technology, the increase in the costs of drugs, biologics, medical
devices, and information technology upgrades necessary to deliver highly
specialized care continue to demand greater resources. Moreover, in the
current time of low unemployment, many teaching hospitals are experiencing
increased wage costs related to staff shortages and higher labor costs.
Medicare's inflation update for service payment rates does not account for
these important cost increases.
Furthermore, teaching hospitals, which represent 6 percent of all
hospitals, provide care for 44 percent of the uninsured. As the number of
uninsured individuals continues to increase, so do the challenges faced by
teaching hospitals in providing care to this population of individuals.
Teaching hospitals are the safety net providers in many of our communities
for the uninsured and Medicaid low-income patients.
Teaching Hospitals Need
Additional Relief from the BBA
Congress can assist teaching hospitals in the above three areas by:
- Maintaining IME levels at 6.5% (FY 2000 levels) in FY 2001 and
thereafter; (S.2394
/ H.R.4239
);
- Increasing the Medicare PPS payment update to reflect the increase
in the costs of drugs, devices, biologics, technology and wages (S.2018
/ H.R.3580)
- Freezing Medicaid Disproportionate Share Hospital payments at
current levels (FY 2000). as proposed in S. 2299
/ S.2308
and H.R.3698
/ H.R.
3710.
The AAMC looks forward to working with Congress to ensure that our
nation's teaching hospitals can continue to provide Medicare and Medicaid
beneficiaries with the high quality health care they deserve.
Contacts
Lynne Davis or Paul Bonta , AAMC Office of Governmental
Relations, 202-828-0526. |
