| Congress and the President still have not resolved
their disputes over legislation to provide relief to the
healthcare industry from severe cuts to Medicare and
Medicaid reimbursement enacted by the Balanced Budget
Act of 1997 (BBA). After deliberating throughout October
about the appropriate scope of BBA relief legislation,
the Republican leadership in both houses of Congress
finally reached an agreement at the end of the month.
The resulting legislation, the “Medicare, Medicaid, and
SCHIP Benefits Improvement and Protection Act of 2000”
(H.R. 5543), would provide over $32 billion in relief
over five years. The President has threatened to veto
the bill because it gives too much money to managed care
organizations and fails to meet some of the
Administration’s health priorities, including funding
for DSH and teaching hospitals that go beyond the
current Congressional proposal.
NAPH, along with scores of other healthcare and
provider organizations, has been urging Congress and the
Administration to work together to pass BBA relief
legislation before the end of the congressional session.
The leadership bill that passed the House and is pending
in the Senate, H.R. 5543, while not as generous to
safety net providers as some of the earlier proposals,
would provide substantial relief for providers. In
addition to the Medicaid DSH provisions noted above, the
major provisions included in the bill are:
Medicaid
·Freezes the FY 2001 DSH allotments at the FY 2000
level with a CPI inflator and, for FY 2002, a CPI
inflator on the FY 2001 allotment (so no BBA cuts in
either 2001 or 2002). In 2003, however, the allotments
revert to the level they would have been in the BBA
(with the cuts as they would have occurred in the BBA in
2002 and a CPI inflator). This provision is only
effective as of the date that the final upper payment
limit (UPL) regulation is published (thus, hinging the
restoration on the finalization of the rule).
·States with extremely low DSH allotments would
receive allotments equal to 1 percent of total state
Medicaid expenditures. (This provision is also effective
when the final UPL regulation is published).
·The hospital-specific DSH cap would be expanded to
175 percent for all public hospitals for two state
fiscal years after September 30, 2002. This provision is
intended to ameliorate the impact of the UPL regulation.
California’s existing 175 percent provision is
unaffected.
Medicare
·Provides a full market basket update in FY01 and
market basket minus 0.55 in FY02 and FY03. The full
market basket update is restored for FY 2004 and
thereafter.
·Decreases scheduled Medicare DSH reductions to -2
percent in FY01 and -3 percent in FY02. There are no
Medicare DSH reductions scheduled in 2003 and beyond.
·Applies a uniform 15 percent threshold for all
hospitals to qualify for Medicare DSH payments beginning
4/1/01. Although this provision was intended to benefit
rural hospitals, it also lowers the qualifying threshold
for smaller urban hospitals from 40 percent to 15
percent. DSH adjustments for smaller urban hospitals
will range from 3.8 percent to the current 5 percent
level. The qualifying threshold and adjustment formulae
for large urban hospitals are unchanged.
·Increases the adjustment for Indirect Medical
Education to 6.5 percent in 2001 and 6.375 percent in FY
2002, with a 5.5 percent adjustment taking effect in FY
2003.
·Raises the floor on Direct Graduate Medical
Education payments from 70 percent to 85 percent of the
national average beginning with the FY 2002 cost
reporting period.
·Increases reimbursement for bad debt from the
current 55 percent level to 70 percent beginning in
FY01.
·Provides a two-year grand-fathering provision for
entities currently in provider based status. Any
facility located within 35 miles of the main campus of
the hospital meets the geographic requirements for
provider-based status. Entities that meet the 340B
definition of “safety net” provider are exempt from
geographic requirements.
Upper Payment Limit (UPL) Issues
·Requires that HCFA issue a final rule before
December 31, 2000.
·Requires a special transition period through October
1, 2008 for states with enhanced payments in effect
before October 1, 1992. The special transition period
would occur in state fiscal years between October, 2002
and October, 2008. In the first year, payments would be
reduced by 15 percent from what they would have been. In
the next five years, payments would be reduced by an
additional 15 percent each year from what payments would
have been in that year.
Other Non-DSH Medicaid and SCHIP Issues
·Implements a new FQHC prospective payment system
designed to maintain cost reimbursement.
.Does not include the legal immigrant benefits
restoration package.
·Allows states to retain about 60 percent of unspent
allotments for FY 1998 and 1999, with the rest
redistributed to states using all their allotment.
The House passed the bill on October 26; it is
pending in the Senate. However, the GOP bill continues
to be unacceptable to the White House, in part because
it does not include certain health reforms which the
President has previously requested and in part because
it now also includes a substantial number of tax
provisions, some of which the President finds
objectionable. The President has threatened to veto the
bill if it reaches his desk in the present form. Since
the passage of the GOP bill, House Democrats, many of
whom voted against the GOP package, introduced a
substitute Medicare givebacks bill. The Democrat’s bill,
which offers greater relief for providers, includes a
two-year market basket update, a permanent freeze on
Medicaid DSH reductions and restores Medicaid and SCHIP
benefits for legal immigrants.
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