Gun to the head
Debt-ceiling law reminds providers who runs the healthcare show
It just doesn’t get any easier, does it? Like a weary soldier being called up for another tour, healthcare providers are being asked to pick up arms again to battle the Medicare payment cuts called for in the Budget Control Act of 2011 that became law last week. The Patient Protection and Affordable Care Act. The final value-based purchasing regulations. The Independent Payment Advisory Board. And now this.
If providers hadn’t realized it before, they should know now that they no longer are in control of their own industry. It’s in the hands of those who pay the bills, and the biggest hands of all are the federal government. That’s why we smile in our Chicago newsroom every time we hear someone say the government should keep its hands off healthcare. It’s way, way too late for that. The hands are at healthcare’s throat.
In July, the CMS released a report on healthcare costs that estimated that the nation spent about $2.6 trillion on healthcare in 2010. Of that amount, the government—both state and federal—covered about 45%. By 2020, national healthcare spending will hit a little over $4.6 trillion, the report said. By then, state and federal governments will be on the hook for more than 49% of that tab. That’s a price the government can no longer afford to pay, and it wants to renegotiate its bill.
One way the government wants to do that is with last week’s debt-ceiling legislation. Under the law, a 12-member bipartisan congressional panel is charged with finding by Nov. 23 up to $1.5 trillion in savings over the next 10 years. The panel must have its savings plan enacted a month later by Congress. Provider groups are concerned that the panel may go after Medicare reimbursement rates to help meet its savings target. If the panel can’t decide or if its proposed savings plan fails to become law, an automatic 2% across-the-board reduction in Medicare reimbursement rates will take effect next year. That’s the outcome providers should hope for.
Passage of the law brought out the usual crying towels from the healthcare industry. Alarmist rhetoric filled the airwaves and inboxes across the country: The plan will devastate the Medicare program and take the entire industry down with it was the message. Well, not really. For most, it will be a pinch, not a punch, if the 2% trigger is pulled.
A day before President Barack Obama signed the debt-ceiling bill into law, the CMS issued a set of final regulations on Medicare payment rates to inpatient hospitals. Under the regulations, Medicare payment rates will go up 1% in fiscal 2012, which starts Oct. 1. That will mean an additional $1.13 billion for hospitals from Medicare in the coming year. The same regulations gave long-term acute-care hospitals a 1.8% bump worth an additional $126 million. A few days before that, the CMS issued other regulations that will increase Medicare payment rates to hospices and rehabilitation hospitals by 2.5% and 2.2%, respectively. (Skilled nursing facilities took an 11.1% hit in fiscal 2012 equal to nearly $4 billion.)
So, the net effect of the automatic 2% cut in fiscal 2012 if the commission’s savings plan fails would be a 1% hit on hospitals, with LTACs, hospices and rehab facilities still getting more money. It could be a lot worse. Just ask nursing homes. Or ask physicians, who are facing a nearly 30% cut in Medicare pay Jan. 1.
Some institutional healthcare providers haven’t made it easier on themselves, either. Stories about multibillion-dollar acquisitions, multibilliondollar construction and renovation projects, exorbitant charges for services and seven-and eight-figure salaries for healthcare executives splash across newspapers, magazines, websites and smartphones daily. At the same time, many of the same organizations and executives are balking at some of the reform law’s strong-arm tactics to provide more cost-effective care.
What Congress and Obama did last week was to gently yet firmly remind the healthcare industry who’s in charge.