Proposals may freeze Medicare payments

Published: Sunday, January 19, 2003 at 6:01 a.m.
Last Modified: Saturday, January 18, 2003 at 9:57 p.m.
WASHINGTON - To slow the growth of Medicare, an influential federal advisory panel will soon recommend that Congress freeze payments to nursing homes and home care agencies and reduce the cost-of-living allowance that hospitals are scheduled to receive next year.
Republicans in Congress and Bush administration officials welcomed the proposals, saying they would save money for taxpayers and the Medicare trust fund. But health care providers expressed alarm, saying the proposals could reduce access to care for the elderly and disabled.
The panel, the Medicare Payment Advisory Commission, recommended a 2.5 percent increase in Medicare payments to doctors next year. Payments to doctors were cut 5.4 percent last year, and a further cut of 4.4 percent is scheduled to take effect on March 1.
Doctors are lobbying Congress to block that reduction. The Senate is poised to approve a proposal by Sen. Charles E. Grassley, R-Iowa, to keep doctor payments at 2002 levels for the rest of this year. It is unclear whether the proposal, part of an omnibus spending bill, will ultimately become law.
In a draft of its annual report, to be sent to Congress in March, the commission said that "Medicare payments for hospital services are at least adequate" to cover the costs of efficient providers. Payments to nursing homes and home health agencies appear "more than adequate" to cover the costs of treating Medicare patients, the panel said.
Medicare payments to home health agencies were cut 4.9 percent on Oct. 1, and nursing homes say their payments were reduced an average of 10 percent at that time. Experts on the staff of the commission said that home care agencies and nursing homes had been able to control their costs without reducing the quality of care.
At a meeting last week, many of the 17 commissioners said Medicare had no obligation to make up for underpayments by other insurers, like Medicaid, the federal-state program for low-income people.
"We should not use Medicare dollars to offset Medicaid losses," said the commission chairman, Glenn M. Hackbarth. He added, "I don't see evidence to support the claim that our recommendations would impede access to quality care."
With growing federal deficits, Republicans are eager to slow the growth of Medicare, but they face political pressure from two sources: elderly people demanding coverage of prescription drugs and health care providers lobbying for higher Medicare payments.
Congressional aides said the commission's advice would make it easier for some lawmakers to resist the pressure from hospitals, nursing homes and home care agencies.
John C. Rother, policy director of AARP, said: "The commission is a highly respected group whose recommendations usually carry great weight in Congress. Its recommendations will help Congress resist the otherwise overwhelming political pressure to raise provider payment rates." AARP, the group formerly known as the American Association of Retired Persons, says Congress should not increase payments to providers without ensuring that older Americans get drug coverage.
Richard J. Davidson, president of the American Hospital Association, said his members were "tremendously disappointed" with the commission's proposal to reduce the annual inflation adjustment. The commission, he said, underestimated the "enormous cost pressures" on hospitals from technology, pharmaceuticals, malpractice insurance and disaster preparedness.
One commission member, Carol Raphael, president of the Visiting Nurse Service of New York, the largest nonprofit home care agency in the nation, expressed grave reservations about the proposed freeze in payment rates for home care.
At a time when chronic illness is more prevalent and the population is aging, Raphael said, fewer people are using Medicare's home health care provision. The number of Medicare beneficiaries receiving home care declined to 2.2 million in 2001, from 3.5 million in 1997.
"This is very puzzling," Raphael said. She suggested that some home care agencies may have become more selective, avoiding high-cost patients who have Alzheimer's disease, serious wounds or complicated forms of diabetes.
James C. Pyles, a lawyer for the American Association for Home Care, said: "More than 1.3 million people have been eliminated from the rolls. They include some of the sickest patients, those who really need the benefit."
The staff of the commission and the chairman proposed cuts in Medicare payments to teaching hospitals, but by a vote of 9-6, the panel rejected that idea.
Kenneth E. Raske, president of the Greater New York Hospital Association, which represents 96 teaching hospitals, said, "The staff recommendation would have been devastating to academic health centers and teaching hospitals."
Medicare pays $5.1 billion a year to teaching hospitals for some of the extra costs they incur. The commission staff said such hospitals were overpaid because the extra costs totaled just $2.5 billion.
The commission expects a 3.5 percent increase in the cost of goods and services used by hospitals of all types next year. But it said hospitals could get by with an inflation update of 3.1 percent for inpatient care and 2.5 percent for outpatient services. Together, it said, those recommendations would save $250 million to $800 million next year and could save $1.2 billion to $6 billion over five years.
Hospitals, like doctors and nursing homes, "should be expected to improve productivity," the panel said.

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