Whitney Palmer

Medicare Passes, Budget Left Unfinished As Congress Wraps Up 2003

Published in the January 2004 AAMC Reporter

In early December, President Bush signed the sweeping Medicare legislation Congress passed after a six-year struggle to revamp the program. The $400 billion law, narrowly approved by Congress in November, includes a discount prescription drug card and voluntary prescription drug benefit, better Medicare fee-for-service benefits and provisions to help teaching hospitals and academic physicians.

The AAMC sent a letter of support to the House and Senate leadership on Nov. 19. In the letter, AAMC President Jordan J. Cohen, M.D., expresses the AAMC’s appreciation and highlights a number of provisions that will benefit academic medicine.

In the letter, he states, “We are pleased that the agreement includes support for teaching hospitals by ameliorating current reductions to the Medicare Indirect Medical Education (IME) adjustment and states’ Medicaid Disproportionate Share Hospitals (DSH) allotments.” Dr. Cohen goes on to acknowledge the agreement’s “inclusion of temporary relief from cuts to Medicare physician payments, as well.”

Steve Lipstein, president and CEO of BJC Healthcare in St. Louis, and chair of the AAMC’s Medicare Special Action Committee, views the measure with pause, calling it “an upside with a cautionary flag.”

“Congress took many steps forward that will be good for hospitals and doctors,” he says. “But the problem is that [the bill’s provisions] will cost an additional $100 billion over the next 10 years, and it comes when the federal government still has a very large deficit. If this [Medicare] program is deficit financed, you have to wonder if it can be sustained in the long term.”

The law, known as “The Medicare Prescription Drug, Improvement and Modernization Act of 2003,” increases Indirect Medical Education (IME) payments from 5.5 percent to 6 percent from April 1 to Sept. 30, 2004, 5.8 percent in FY 2005, 5.55 percent in FY 2006, and 5.35 percent in FY 2007 before rebounding to 5.5 percent in FY 2008. The hospital inpatient update will remain at full market basket for FY 2004, and hospitals that are part of CMS’s quality initiative in FY 2005-2007 will receive full market basket updates. Those not participating will be reduced by 0.4 percent.

State Medicaid DSH allotments are 116 percent of FY 2003 levels for FY 2004 — the levels will hold until the year they fall below levels scheduled by the Balanced Budget Act. Increases will then be controlled by inflation. “Low DSH” states will see increases of 16 percent over the next five fiscal years.

It also maintains the “carve out” of Medicare Direct Graduate Medical Education (DGME) and IME payments associated with Medicare Advantage plans (Medicare Advantage is the new name for Medicare+Choice).

There are also provisions for physicians. The physician payment conversion factor is set at least at 1.5 percent for 2004 and 2005, using a 10-year rolling average when calculating the gross domestic product.

In addition, the law includes a number of provisions affecting financing for residency programs. It reapportions the amount of hospital resident limits that are “unused” to teaching hospitals that need to increase resident limits. More specifically, if a hospital’s resident count fell below the resident limit on or before Sept. 30, 2002, the limit wil drop by 75 percent of the difference. Hospitals wishing to increase their limits can apply to receive up to 25 additional positions.  The increases will be granted in this order: rural hospitals, hospitals in small urban areas, and hospitals where the resident training program is the only one in the state.

In addition to passing the Medicare legislation, Congress attempted to complete work on the seven outstanding FY 2004 appropriations bills before adjourning in 2003. The House voted Dec. 8 to approve a $328.1 billion conference agreement on the omnibus spending legislation that included all seven bills. However, Senate action on this legislation will not take place before Jan. 20. The agreement includes a $1 billion (3.7 percent) increase for the National Institutes of Health. But the real increase is reduced to $835 million (3.1 percent increase) by the 0.59 percent across-the-board cut applied to every account in the bill, including all non-defense FY 2004  appropriations bills already enacted, designed to cover part of the cost of the package’s other priority programs.

The NIH budget will drop further because the conference agreement authorizes the HHS secretary to impose a 2.2 percent “tap” on Public Health Service budgets to fund evaluation research programs, such as the Agency for Healthcare Research and Quality (AHRQ). The agreement also calls for the transfer of $150 million from the NIH to the global HIV/AIDS fund.

The conference agreement provides $294.2 million for Title VII health professions education programs — a 4.6 percent cut. For Title VIII nursing education programs, the bill includes $141.9 million, an increase of 25.9 percent. The AHRQ receives $303.7 million, the same amount as in FY 2003.

Under the omnibus agreement, VA medical care gets a $2.8 billion (11.9 percent) hike from FY 2003 and VA medical research receives an $8.2 million (21 percent) increase.

March 25, 2010 - Posted by wjpalmer | Healthcare, Politics | discount prescription drug payment, Medicaid Disproportionate Share Hospital allotments, Medicare fee-for-service benefits, Medicare Indirect Medical Education adjustment, Medicare Modernization Act of 2003, omnibus spending 2003