The budget proposed by President Donald Trump involves several major cuts to Medicare payments for hospitals, reductions that are “unsustainable” and “staggering,” according to the Federation of American Hospitals (FAH) and the American Hospital Association (AHA).
Among the proposals opposed by the hospital groups is one to reduce how much Medicare will pay from bad debts resulting from beneficiaries failing to pay deductibles or copays. Rather than the current 65 percent, reimbursement for bad debt would be cut to 25 percent, which the administration said would save the federal government $37 billion over the next decade and bring Medicare policy closer to that of private payers.
In an additional hit to hospitals that serve low-income patients, the budget would remove uncompensated care payments from the Inpatient Prospective Payment System (IPPS) in fiscal year (FY) 2020, establishing “a new process to distribute uncompensated care payments to hospitals based on share of charity care and non-Medicare bad debt.” The result would be $138.4 billion cut in these payments from Medicare over the next 10 years.
With hospitals “already experiencing the lowest Medicare margins in history,” FAH president and CEO Chip Kahn came out in opposition to what he calls “flawed proposals” from the Trump administration.
“Enough is enough,” Kahn said in a statement. “These unsustainable cuts would directly impact hospitals’ ability to serve patients.”
The AHA saved its strongest language in opposing changes to the site-neutral payment policy. Beginning in 2017, CMS reduced Medicare payments for off-campus, hospital-owned departments. Groups like the AHA have opposed expanding this policy, but the budget would do just that, wiping out any exemptions offered to facilities which began billing Medicare or were under construction before Nov. 2, 2015—the day legislation with the site-neutral payment policy was signed into law.
The AHA strongly opposes “any proposals to reduce payment for services provided to Medicare patients in the outpatient setting,” said AHA president and CEO Rick Pollack. “Hospital-based facilities provide access to critical services that are not otherwise available in the community and treat patients with very severe conditions.”
Furthering this change away from payment based on where care is delivered would be a proposed new Medicare payment system for post-acute care providers. The budget proposed a lower annual payment update from FY2019 to FY2023. Then, beginning in FY2024, skilled nursing facilities, home health agencies, inpatient rehabilitation facilities, and long-term care hospitals would be paid under a new, “unified post-acute care payment system. This would result savings of $80 billion for the federal government over the next 10 years, which the AHA called “staggering cuts staggering cuts to payments for these specialized services.”
A presidential budget doesn’t carry the weight of law and includes many parts Congress can (and often does) ignore. In fiscal year 2018’s proposed budget, for example, the administration wanted to cut funding for National Institutes of Health (NIH). Congress, however, ended up giving NIH an additional $2 billion.
It does, however, lay out the administration’s priorities and offers clues for policies lawmakers or regulators could pursue in the near future or follows recent legislative activity. The budget’s $1.4 trillion in cuts to Medicaid over the next decade largely follow those suggested by the 2017 Graham-Cassidy legislation to repeal the Affordable Care Act and turn Medicaid into a state-administered block grant program.