‘Doc fix’ in fiscal cliff plan cuts Medicare hospital payments

0 | Congress, Hospitals

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Photo by Karl Eisenhower, Kaiser Health News.

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— Legislation passed by Congress New Year’s Day to avert the dreaded “fiscal cliff” would stop a scheduled payment cut in Medicare physician payments. But hospitals, which have to bear a major part of financing for that “doc fix,” are not happy.

The bill would require that, over the next decade, hospitals pick up nearly half of the approximately $30 billion cost of stopping a 26.5 percent payment cut for Medicare physicians, scheduled to begin today.

The 26.5 percent reduction for doctors comes from a payment formula created in a 1997 deficit reduction law. For the first few years, doctors received modest pay increases. But in 2002, doctors reacted with fury when they came in for a 4.8 percent pay cut under that plan. Every year since, Congress has staved off the scheduled cuts.

The package would reduce hospital payments in two ways. First, it would cut $10.5 billion from projected Medicare hospital payments over 10 years for inpatient or overnight care through a downward adjustment in annual base payment increases. The Senate measure also would reduce Medicaid disproportionate share payments to hospitals by an additional $4.2 billion over the next decade. These cuts are on top of those made to hospitals as part of the 2010 health care law.

Groups representing hospitals said the new plans for reductions will hurt their ability to care for patients.

“While fixing the physician payment formula is essential, it should not be done by jeopardizing hospitals’ ability to care for seniors and their communities,” Rich Umbdenstock, president and chief executive officer of the American Hospital Association, said in a written statement.

Chip Kahn, president and CEO of the Federation of American Hospitals, also expressed dismay that hospitals funded much of the doc fix. “It is not in the best interest of patients or those who care for them to rob hospital Peter to pay for fiscal cliff Paul,” he said.

The American Medical Association said that the “last-minute action” is ”a clear example of how the Medicare program is increasingly unreliable for physicians and patients.”

Dr. Jeremy Lazarus, president of the AMA, said “Congress’ work is not complete; it has simply delayed this massive, unsustainable cut for one year. Over the next months, it must act to eliminate this ongoing problem once and for all.”

The bill also would continue a number of Medicare policies known as “extenders.” Those extenders include a wide variety of policies, including special provisions for some low-volume hospitals and charges for ambulance and physical therapy costs.

Other items in the package that would finance the “doc fix” and Medicare extenders include rebasing bundled payments for end stage renal disease (saves $4.9 billion), implementing competitive bidding for diabetic test strips purchased in retail pharmacies (saves $600 million) and reducing risk-adjusted payments to Medicare Advantage plans ($2 billion).

In addition to the physician payment fix, the bill alters tax rates and delays a series of automatic cuts in federal spending, called “sequestration,” scheduled to go into effect Jan. 2. That includes a 2 percent reduction to physicians and other Medicare providers – including hospitals.

While seniors would see no changes in their benefits under sequestration, Medicare providers will face $11 billion in cuts through the end of the government’s fiscal year on Sept. 30.

House follows Senate and passes bill to avert 'fiscal cliff'

The measure, which awaits the president's signature, puts off large cuts in federal spending and increases taxes. But it delays efforts to revamp entitlement programs.

The New York Times: Amid Pressure, House Passes Fiscal Deal

Ending a climactic fiscal showdown in the final hours of the 112th Congress, the House late Tuesday passed and sent to President Obama legislation to avert big income tax increases on most Americans and prevent large cuts in spending for the Pentagon and other government programs. ... In approving the measure after days of legislative intrigue, Congress concluded its final and most pitched fight over fiscal policy, the culmination of two years of battles over taxes, the federal debt, spending and what to do to slow the growth in popular social programs like Medicare (Steinhauer, 1/1).

The Wall Street Journal: Congress Passes Cliff Deal

But the compromise bill, which blocked most impending tax increases and postponed spending cuts largely by raising taxes on upper-income Americans, left a host of issues unresolved and guaranteed continued budget clashes between the parties. ... At the same time, the bill defers some of America's toughest spending problems—in particular the ballooning cost of health care—and it doesn't come close to the kind of $4 trillion deficit-reduction deal the country's leaders had hoped to negotiate (Hook, Boles and Hughes, 1/2).

USA Today: Divided GOP House Approves Senate 'Fiscal Cliff' Plan

A divided Republican House passed the Senate's "fiscal cliff" agreement Tuesday night, following a tense day of GOP protests that the plan does not do enough to rein in federal spending. ... Spending cuts totaling $24 billion over two months aimed at the Pentagon and domestic programs would be deferred. That would allow the White House and lawmakers time to regroup before plunging very quickly into a new round of budget brinkmanship certain to revolve around Republican calls to rein in the cost of Medicare and other government benefit programs (Davis and Jackson, 1/2).

Los Angeles Times: 'Fiscal Cliff' Plan Clears House With GOP Divided

Speaking at the White House before leaving to rejoin his family on vacation in Hawaii, Obama called the compromise "just one step in the broader effort" to reduce the deficit, and specifically pointed to spending on Medicare for an aging population as the major force driving the red ink. "I am very open to compromise," he said. But, he added, "we can't simply cut our way to prosperity" (Mascaro and Hennessey, 1/1).

Politico: The Fiscal Cliff Deal That Almost Wasn't

But the failure to address several big issues sets up another fiscal showdown in late February, when the two-month delay in the sequester coincides with the deadline to raise the country's $16.4 trillion debt limit. The pact also does little to reduce trillion-dollar-plus deficits, shore up entitlement programs, overhaul the tax code or stimulate the U.S. economy — the casualty of a polarized political culture that scorns compromise (Bresnahan, Budoff Brown, Raju and Sherman, 1/2).

The Associated Press: Congress OKs Cliff Deal, Signaling Future Fights

"Now the focus turns to spending" and overhauling the tax code, [Speaker John] Boehner said in a written statement after the vote. He said the GOP will fight for "significant spending cuts and reforms to the entitlement programs that are driving our country deeper and deeper into debt," a reference to costly benefit programs like Medicare, Social Security and Medicaid (Fram 1/2).

Kaiser Health News (KHN) is a nonprofit news organization committed to in-depth coverage of health care policy and politics. The Washington, D.C.-based news service is a partner of KHI News Service.



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