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Federal budget agreement extends Medicare payment decrease

Friday December 20, 2013
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The bipartisan federal budget agreement finalized in Congress this week has financial ramifications for the healthcare industry.

The 2% decrease in Medicare provider payments, part of the spending reduction package known as the sequester, was extended from 2021 to 2023. The decrease could be modified in any future federal budget, however.

Tom Nickels, senior vice president of the American Hospital Association, stated that the “AHA is deeply disappointed” with the decision to lock in the Medicare payment reduction for fiscal year 2014 and prolong it in the future.

“Hospitals face a huge array of change and challenges,” Nickels said in a news release. “From electronic health records to new penalty programs and payment models to new regulatory hurdles, Congress should support these efforts rather than add uncertainty. In the absence of a serious conversation about real entitlement reform, this undermines hospitals’ ability to provide access to quality healthcare services.

“While there are some positive provisions in the package, further arbitrary cuts in funding to Medicare providers are harmful and unproductive.”

On the bright side, according to the AHA, the budget delays a scheduled reduction in Medicaid payments to disproportionate share hospitals from FY 2014 to FY 2016.

Also included in the budget are a package of changes to long-term care payments and a six-month extension of funding for federal low-volume and Medicare-dependent hospital programs. This funding is considered crucial for small and rural hospitals.

‘Doc fix’

The budget also includes a 0.5% rise in Medicare payments for physicians that will be in effect from January through March, thus putting off a 20.1% reduction in payments that would have begun in January.

Congress continues to ponder a way to fund a long-term “doc fix,” meaning a stabilization of payment rates that would remove the threat of a substantial payment decrease for the foreseeable future.

If such a decrease ever took effect, it could limit physicians’ capacity to treat Medicare patients.

Without a doc fix and with another round of debate over raising the federal debt limit looming early next year, “March likely will bring another round of fiscal flash points” for hospitals and other providers, AHA CEO Rich Umbdenstock said in a news release.


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