A telephone call with reporters on January 23 couldn’t have been more explicit. The American Hospital Association, the big trade group for the nation’s not-for-profit hospitals, does not want to be the government’s “piggy bank,” as the association’s top lobbyist, Tom Nickels, put it. Nickels made it clear to the many Beltway health care reporters on the call that hospitals cannot take further Medicare payment cuts without jeopardizing patient care, and the AHA was delivering that message to Capitol Hill. (Per OpenSecrets, AHA’s “primary focus is lobbying against reductions in Medicare payments.”) Congress needs more money for other programs? Nickels’ suggestion is to take it from seniors and disabled people on Medicare by requiring them to pay more of their medical bills themselves.
It’s the Beltway’s classic fiscal solution: Rob Peter to pay Paul. If a new program needs money or an existing one wants an increase, the money has to come from the budgets of others. In Capitol Hill lingo, there must be a “pay for” or an offset for the new funding. This horse-trading over “pay fors” has become so common perhaps it explains why the mainstream media passed on covering the AHA’s very transparent legislative strategy. While many of these budget squabbles hardly qualify as breaking news, this particular squabble could affect 50 million seniors and disabled people on Medicare, and merits some coverage beyond the few trade pubs that picked it up.
Thanks to reporting by InsideHealthPolicy (subscription required) and HealthLeaders Media, we know that the nation’s not-for-profit hospitals—about 58 percent of the country’s total of 5000—are upset because they have already been hit by Medicare reimbursement cuts mandated by the Affordable Care Act, which was a “pay for” for the subsidies to help the uninsured buy coverage. (It should be noted the hospitals agreed to these cuts as part of their deal with Obama.) Still, the AHA argues hospitals have already absorbed $113 billion in Medicare and Medicaid cuts since 2013, and that’s enough. They aren’t too happy, either, about other ACA reforms like penalizing facilities for too many costly readmissions from Medicare patients (thought to be related to poor care).
What really worries them, though, is that Congress may eye further hospital cuts to help pay for the so-called “doctor fix” (fixing the Medicare physician payment formula). Some background: The formula for paying doctors, called the SGR, was created by Congress in the late 1990s as a way to slow down Medicare costs. It linked payment to an economic growth target, and for the first few years doctors got modest payment increases because expenditures did not exceed the targets. A decade ago, expenditures exceeded targets. But each time a cut was to take effect, Congress came to the rescue, postponing them (while increasing the tab for fixing the problem once and for all). The current fix—agreed to in December— expires March 31. The Congressional Budget Office now estimates the price tag for a fix ranges between $140 and $180 billion.
Who will pay for that? Medicare beneficiaries, if the AHA has its way. If beneficiaries have to pay more, the government pays less and that frees up dollars to pay off the docs. Per HealthLeaders Media, Nickels suggested on the AHA press call that to find the money Congress should look at Medicare structural reforms that could include means testing, requiring Medigap policies to cover less, and combining Parts A (hospital benefits) and B (physician services). “Congress needs to come up with these kinds of reforms to the program, which would not only do the program good, but could come up with that level of savings,” Nickels told reporters.
I reported on these structural changes when they were floated early last year. In particular, I noted that proposals to make seniors with higher incomes pay more for their benefits would eventually mean those with incomes as low as $45,000 in 2012 dollars could pay much more. Last year, about five percent paid higher premiums—those with incomes exceeding $85,000 for individuals and $170,000 for couples. Another proposal that changes Medicare’s deductibles could mean seniors who use medical services—which most do—would be exposed to out-of-pocket costs four times higher than they have now.