October 22, 1999

Senate Finance, House Ways and Means Committees Pass BBA Relief Legislation

The Senate Finance and House Ways and Means Committees marked up and passed Balanced Budget Act (BBA) relief legislation Oct. 21. Respectively, the proposals provide 15.3 billion (over 10 years) & 10.6 billion over 5 years to hospitals, physicians, skilled nursing facilities, home health agencies, and Medicare+Choice plans. For teaching hospitals the plans freeze Medicare Indirect Medical Education (IME) and Disproportionate Share Hospital (DSH) payments and limit losses under the outpatient prospective payment system (PPS).

The Senate Finance Committee bill includes a four year IME freeze at 6.5% and a one year DSH freeze in FY 2001 at FY 2000 levels. The House bill H.R. 3075 includes a one year IME freeze at 6% for FY 2001 and a one year DSH freeze in FY 2001 at FY 2000 levels. The provisions would respectively provide approximately $1.85 billion over 10 years and $550 million over 5 years to teaching hospitals.

H.R. 3075also includes additional graduate medical education provisions affecting Direct Graduate Medical Education (DGME) payments. Specifically, the Secretary of the U.S. Department of Health and Human Services would be required to calculate a national average DGME payment and adopt it in FY 2001. Hospitals whose payments would be below the national average would see their payments increased to the average level in FY 2001, while those whose payments have been above average would see their payments reduced to the national average over five years.

Teaching hospitals would also benefit from the packages' reforms to the outpatient PPS. The Senate Finance Committee proposal would provide $1.8 billion (over 10 years) to hospitals by limiting payment losses over three years. An institution would not lose more than 10% of pre-BBA payments in the first year, 15% in the second year and 20% in the third year. The Ways and Means package creates a 3 year payment floor that would use "targeted incentives" to reward hospitals that increased their efficiency as quickly as possible while protecting them from large payment losses. In the first year, hospitals would be paid 80 cents on the dollar for the first 10 percent of their losses compared to pre-BBA payment, 70 cents on the dollar for the second 10 percent, and 60 cents on the dollar for the third 10 percent. Such payments would provide $1.8 billion over 5 years.

Other outpatient provisions in H.R. 3075 include an outlier adjustment for high cost cases in outpatient settings and a plan to provide a 2-3 year temporary transition "pass-through" allowing new drugs and devices to be paid outside of the ambulatory payment system.

Last, both bills include GME provisions which would allow hospitals to change their resident caps in order to encourage rural training programs. No amendments on special payments were offered to the Senate BBA relief legislation. The following amendments on special payments were offered to the Thomas legislation:

• Rep. Ben Cardin (D-Md.) All Payer Trust Fund Amendment (similar to H.R. 1224)-- Withdrawn

• Rep. John Lewis (D-Ga.) Amendment Extending the DSH Freeze Through FY 2002-- Withdrawn

• Rep. Jerry Kleczka (D-Wisc.) Amendment on Providing Full GME Payments for Child Neurology Residents-- Failed

• Rep. Charles Rangel (D-N.Y.) Amendment to provide DSH payments associated with Medicare + Choice directly to hospitals-- Withdrawn

Information: Lynne L. Davis or Paul Bonta, AAMC Office of Governmental Relations, 202-828-0526.