Hospitals benefit from budget deal

On the Hill:

Congress passed a budget deal on Feb. 9, 2018, that was quickly signed into law. This budget deal included a number of key priorities for the hospital industry, such as:

  • A two-year delay of the Medicaid Disproportionate Share Hospital pay cuts
  • An extension of the Medicare Dependent Hospital Program
  • An additional extension of CHIP
  • Funding to address the opioid crisis
  • Repeal of outpatient therapy caps
  • Repeal of the Independent Payment Advisory Board

Senate Finance Committee Chairman Orrin Hatch (R-UT) and Senator Chuck Grassley (R-IA) sent a letter to acting IRS Commissioner David Kautter requesting additional information about the agency’s review of hospitals’ charitable giving. With the expectation that hospitals will provide free or cheaper care for the underserved in their communities, hospitals received approximately $25 billion annually in tax breaks. In their letter, the senators expressed an interest in ensuring that IRS oversight of hospitals’ charitable giving is sufficient to ensure that “their activities are in line with the benefits they enjoy under the Internal Revenue Code.”

At the agencies:

A report from the Centers for Medicare and Medicaid Services (CMS) predicts that Medicare and Medicaid spending will grow faster between 2017 and 2026 than private insurance. The discrepancy comes as baby boomers age into Medicare and leave the private market and the number of older and disabled Medicaid beneficiaries grows. Drug costs are also expected to rise as specialty drug use increases and rebates play a smaller role in keeping prices down. Overall, growth in Medicare and Medicaid spending is projected to contribute substantially to the increase in national health spending, which is expected to average 5.5 percent per year between 2017 and 2026 and reach $5.7 trillion by 2026.

From the administration:

President Trump’s 2019 budget request includes numerous significant health-related components. The request would cut the Department of Health and Human Services’ (HHS) discretionary budget by 21 percent. Following the two-year budget deal recently signed into law, Trump added around $26 billion to his original request, resulting in a slight increase in the overall HHS budget. The requested budget calls for a $53.3 billion increase in CMS mandatory and discretionary spending over FY 2018 levels, to $1.1 trillion. The budget request includes changes to the Merit-based Incentive Payment System (MIPS) and alternative pay models (APMs), medical malpractice reform, graduate medical education program funding and cuts to hospital payments for uncompensated care and bad debts.

MIPS and APMs: The budget request proposes changes to MIPS and APMs. The requested budget would simplify MIPS by adopting broader measures to assess clinician performance at the group-level only. These pay adjustments would apply only to services in the physician fee schedule. The budget request also proposes that doctors would receive their five percent bonus on physician fee scheduled revenues received through the Advanced APMs in which they participate. These changes are unlikely to materialize because they would require legislative action, which is even more difficult in an election year and just after Congress passed other changes to Medicare.

Medical malpractice reform: President Trump’s budget request includes several reforms to the malpractice system, which it says benefits a relative few at the expense of making healthcare more expensive for Americans. The proposals include a cap on non-economic damages, more safe harbors for providers, the consideration of workers’ compensation and auto insurance in a lawsuit, a three-year statute of limitations and excluding providers’ apologies from evidence. According to HHS, these reforms would result in $30.8 billion in saving to HHS over 10 years and $52.1 billion in deficit reduction.

Graduate medical education: The budget request proposes to reform the graduate medical education (GME) program by consolidating GME spending from Medicare, Medicaid and the Children’s Hospital GME program into a single grant. Hospitals would receive funding based on the number of residents and the portion of Medicare and Medicaid inpatient days. The new program would be jointly run by CMS and the Health Resources and Services Administration. The changes are estimated to save $48.1 billion over 10 years. Several hospital groups oppose the cuts and believe they would exacerbate the physician shortage.

Cuts to hospital payments: The budget request proposes to stop paying for uncompensated care in the hospital inpatient system by 2020 and would distribute uncompensated care to hospitals based on charity care and non-Medicare bad debt. The budget request would reduce reimbursement for bad debt from 65 percent to 25 percent over three years. Small hospitals, critical access hospitals, rural health clinics and federally qualified health centers would be exempt.

For more information on this topic, or to learn how Baker Tilly healthcare specialists can help, contact our team.

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