Everyone following national economic policy news knows the basics: the Congressional Joint Select Committee on Deficit Reduction, authorized by August’s Budget Control Act, must create a plan to reduce the national deficit by at least $1.2 trillion. This plan must be in place by Nov. 23, and we all expect Medicare and Medicaid reimbursement to be hit hard.
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Providers know what this means. Cuts to these two programs, already underfunded, will have negative ramifications throughout the industry, almost assuredly harming access to care. Republican leaders have been clear that Medicare and Medicaid reimbursement is on their chopping block, and in late September, President Obama proposed his own draconian reductions.
The President submitted a $3 trillion deficit reduction plan to the Committee that included proposed reductions of $320 billion to Medicare and Medicaid. The president's plan calls for cutting Medicare by $248 billion and Medicaid by $72 billion over 10 years.
The plan would reduce Medicare payments for bad debt, cut indirect graduate medical education by 10 percent, and reduce payment updates for post-acute providers. Even more disturbing, the Administration’s plan proposes three changes to payments for rural providers that treat underserved populations.
Starting in fiscal year 2013, the deficit reduction plan proposes to end add-on payments for hospitals and physicians in low-population frontier states. It would then reduce Critical Access Hospital payments from 101 percent to 100 percent of reasonable costs. Finally, the President proposes elimination of the CAH designation for hospitals that are fewer than 10 miles from the nearest hospital.
Currently, 41 percent of critical access hospitals operate at a financial loss. If the President’s proposal to cut billions in Medicare reimbursements hits these facilities, over half of CAHs would lose money. The National Rural Health Association projects that such cuts would cause many rural hospital doors to close permanently.
Congress created the CAH designation in 1997 to prevent rural hospital closures in the 1980s and 1990s. Do we really want to go down that road again, in the name of “deficit reduction”?
Critical access hospitals account for only 5 percent of Medicare hospital inpatient expenditures, and many of these facilities are able to stay open solely because of the CAH program. According to NRHA research, the average CAH supports more than 100 jobs and provides $5 million in wages, salaries and benefits to the local community. The small rural hospital is often the largest or second largest employer in rural America.
In the communities served by CAHs, the traumatic problem this “Great Recession” brought with it is not deficits – it is the lack of economic growth and the permanent disappearance of jobs. More cuts do nothing to help these regions.
The administration also wants to reduce the growth rate target for Medicare's Independent Payment Advisory Board from GDP per capita plus 1 percent to GDP plus 0.5 percent. Proposed Medicaid savings include limiting Medicaid provider taxes beginning in 2015; replacing the current Medicaid payment formulas with a single matching rate specific to each state; and reducing Medicaid disproportionate share payments for hospitals in 2021.
More Medicaid DSH reductions may sound fine to deficit hawks, for whom such cuts are mere abstractions. But they don’t have to deal with the increases in uncompensated care that result when thousands of patients in a region lose health insurance.
Hospitals, large and small alike, have been hammered by the recession, as have their patients. But laying reimbursement cut after reimbursement cut at the feet of providers will do nothing to resolve the economic crisis in which the United States is currently mired, nor will it lead to the lasting delivery system reforms that most all in the industry agree is needed.
Tragically, I don’t think either U.S. political party understands that arithmetic.