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Hospitals: Medicare reforms preferable to cuts

Monday February 18, 2013
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The American Hospital Association has expressed support for several proposed structural reforms to Medicare as alternatives to reductions in healthcare provider payments, according to a letter from AHA Executive Vice President Rick Pollack to Sen. Orrin Hatch, R-Utah.

The AHA and other provider representatives have voiced concern that negotiations to avoid the upcoming budget sequester and to reduce the federal deficit could lead to additional cuts in payments to providers. Such cuts may be more tenable politically than adjustments to benefit levels.

Since 2010, according to the AHA, Congress has authorized $95 billion worth of reductions in hospital payments. "Simply ratcheting down provider payments is not real reform. … These annual cuts create an unstable environment for hospitals, which are already faced with negative Medicare margins," Pollack wrote.

The most dramatic of Hatch’s reform proposals would be an incremental increase in the Medicare eligibility age from 65 to 67 within about 12 years. In his proposal, Hatch noted the average life expectancy rose from 70 when Medicare was created in 1965 to 78 in 2009.

"In the past, raising the Medicare eligibility age was found to be problematic, as it was difficult and expensive to find health insurance at age 65," the AHA’s Pollack wrote. "But starting in 2014, federal law offers guaranteed issue and community rating protections to seniors. This means that a 65-year-old cannot be denied coverage by an insurer, and that the coverage offered will be affordable. This makes gradually raising the Medicare eligibility age to 67 more feasible and less onerous for future seniors."

The AHA also supports Hatch’s proposal to limit Medigap (supplemental Medicare insurance) plans from covering initial out-of-pocket expenses for seniors when they receive care. Such a modification would better restrict "unnecessary utilization," Pollack wrote. "Studies find that Medigap policyholders use about 25% more services than Medicare enrollees without supplemental coverage."

The AHA also agrees with Hatch’s recommendation to create a single combined deductible for Medicare Part A and B services, uniform coinsurance and an annual catastrophic cap. The "existing Part A and B distinction for cost-sharing purposes has outlived its usefulness," Pollack wrote. "This modernization of the program is consistent with health plans Americans have seen throughout their working careers and will likely make more sense to them than the confusing Part A and Part B cost-sharing dichotomy that currently exists."

Less appealing to the AHA is Hatch’s proposal to restrict Medicaid spending by instituting per-capita caps that would impose statutory limits on the amount of federal dollars spent for each Medicaid beneficiary.

"The AHA is extremely concerned about any further reductions to Medicaid, a program vital to the health of the most vulnerable: children, the disabled and the elderly," Pollack wrote. "Over the past few years, Medicaid funding has been cut dramatically as states struggle to balance their budgets. Further cuts to Medicaid would threaten the existence of this vital program, which is a lifeline to so many Americans.

"Today, hospitals provide nearly $40 billion in uncompensated care per year, and that number will grow if coverage is not expanded to those who cannot afford care. If Medicaid coverage is not expanded and the government does not pay its fair share, hospitals will be forced to 'cost-shift,’ or pass along the difference to the privately insured, exacerbating a 'hidden tax’ on insured families. …

"Medicaid already severely underpays providers, and beneficiaries report difficulty finding physicians who accept Medicaid payments."


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