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Plan offers to spend $7.5 billion on BBA relief
Providers looking to President Clinton for relief from cuts from the Balanced Budget Act (BBA) of 1997 might be disappointed in his reform plan. Under the plan, which requires Congressional approval, hospitals and health plans would be hit with payment cuts totaling more than $70 billion over 10 years. About $39 billion in cuts would come directly from hospital payments.
Dick Davidson, president of the American Hospital Association (AHA) in Chicago, says the plan "potentially exacerbates a major ailment, the devastation inflicted by the Balanced Budget Act."
The most publicized part of the plan involves a new prescription drug benefit that would be available to all Medicare beneficiaries. Here are some of the other proposals:
• Inpatient care — a freeze in the inpatient update from 2003 to 2009.
According to preliminary AHA analysis, this would total nearly $35 billion in cuts. For urban hospitals, the update would stick at marketbasket minus one percentage point. For rural hospitals, it would stay at marketbasket minus 0.5 percentage points in fiscal 2003 and increase by 0.1 percentage point each year until the same update applies for rural and urban hospitals.
• Capital costs — an extension through 2009 of a 2.1% reduction in payments for hospital capital costs, which amounts to about $2 billion.
• Prospective payment system (PPS)-exempts — an extension through 2009 in payment reductions to PPS-exempt hospitals, totaling $3 billion. This includes continuing a 15% reduction in payments for capital costs.
• Related services — reduced payments for ambulance, prosthetics and orthotics, hospice, ambulatory surgical centers, durable medical equipment, and laboratory services, to the amount of $4.7 billion over 10 years.
• Fee for service — savings of $25 billion by introducing competitive bidding into the fee-for-service program.
The plan would create a Medicare preferred provider option, and Medicare would contract with existing providers that meet yet-to-be defined quality and utilization standards. Beneficiaries would have lower cost sharing when visiting a Medicare PPO.
AHA is concerned about the competitive bidding proposal. "Giving government the ability to use the enormous economic power that Medicare has could disrupt health care in communities across the country, making the current market power of HMOs pale in comparison," Davidson says.
AHA also is not pleased with the plan for proposing to extend timelines of certain BBA provisions. To ensure that program growth does not "significantly increase" after most of the Medicare provisions of the BBA expire in 2003, the proposal includes out-year policies that protect against a return to unsustainable growth rates, but are more modest than those included in the BBA of 1997.
Even with these extended timelines, however, the proposal sets aside $7.5 billion over 10 years for BBA relief. The administration says it will work with Congress and outside groups to figure out how to best spend the money. One focus may be areas where access to services have been jeopardized.
Other relief efforts include:
• Postponing two years a policy to extend the inpatient transfer provision beyond 10 diagnosis related groups.
• Delaying "volume control" under the proposed outpatient prospective payment system (PPS). Also, the president suggested phasing in the PPS over three years.
• Reclassifying rural hospitals, making it easier for them to receive payments similar to neighboring urban facilities.