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PHOTOCOPY
PRESERVATION
AMERICAN HOSPITAL ASSOC.
American (AHA) Hospital Association
PHOTOCOPY
PRESERVATION
file
THE WHITE HOUSE
Office of the Press Secretary
For Immediate Release
February 1, 1994
REMARKS BY THE PRESIDENT
TO THE AMERICAN HOSPITAL ASSOCIATION
Washington Hilton
Washington, D.C.
10:18 A.M. EST
THE PRESIDENT: Thank you very much. Thank you, Dick;
and thank you, Carolyn. And thank you also for bringing my tea out
here. The Hospital Association is giving care to the President for
his sick voice today. (Laughter.) I thank you.
I appreciate so much what both Dick and Carolyn said,
and I want to begin by thanking all of you here who have ever had me
in your hospitals -- (laughter) -- which is a large number of people.
Especially all the people who represent my native state and who have
done so much to help educate me on these issues over the years.
The time that I have spent in hospitals since I was a
small boy has made a very big impression on me. I always learn
something. I always leave with a sense of inspiration about the
dedication of the people who work there. And I want to say a special
word of thanks to this association for the work that you have done
with our administration over the last year, in a very constructive
way, in helping us to try to develop an approach which would solve
the problems of the American health care system and protect and
enhance what is good about it.
I know that there will still be some issues on which
there will be disagreement as we go forward, but I think it's
important that we clarify today, as Dick did so well in his
introduction, that we agree on the most important issue: We have to
preserve what is right; we have to fix what is wrong; we have to
guarantee private insurance to every American so that everybody will
be covered. That is the only way to stop cost shifting; the only way
to be fair; the only way to solve this problem. (Applause.)
The problem with the health care system in this country
did not just happen overnight. It happened because of the way this
system is organized. Anybody who thinks there are no serious
problems, no crisis in the health care system I would say go visit
your local hospital. (Applause.)
Over the years, because of the insurance system we have
in America, which is unlike any in the world and which, I will say,
is irrelevant to the fact that we have the highest quality care in
the world for the people who can afford it and access it, we have
created a system which often makes it impossible for hospitals to do
their jobs. While insurance companies have set up a system which
enables them to slam the door on people who aren't healthy enough to
get covered, hospitals open the door to everyone, whether they're
covered or not.
We have created in this country, through the systems of
hundreds of different insurance companies writing thousands of
different policies, a giant bureaucracy which, on the insurance side,
sorts the healthy from the sick, the old from the young, the
geographically desirable from the undesirable. And as more and more
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- 2 -
insurance companies sell more and more customized insurance policies
to smaller and smaller groups, each of them has created its own set
of forms and different sets of what would cover, spelled out in
endless fine print. The result, as all of you know, has been a
bureaucratic nightmare.
And what about the hospitals? You have had to create
your own bureaucracy to deal with the insurance bureaucracy, and the
government's as well -- to fight red tape, close loopholes and to try
to get reimbursed somehow. And that only covers the patients who
have good insurance. For those without insurance or with bare-bone
coverage, you're forced to jump through a whole lot of other hoops.
And you probably still often don't get any reimbursement.
Hospitals did not invent this system. You didn't choose
a system which has resulted in hospitals hiring clerical workers at
four times the rate of doctors being added to hospital staffs in the
last 10 years. You did it because of the red tape of the present
system -- the insurance red tape and the government program red tape.
Meanwhile, your missions didn't change -- it's still to
treat the people who are sick who need to be in the hospital.
Regardless of their age or medical history, of what may or may not be
covered, you have to deal with the people that the insurance industry
decides are not profitable. You can't ask whether an illness was a
preexisting condition, it's still an illness.
So what are we left with today? A system where we're
ruled by forms and have less time to make people healthy. A system
that forces doctors and nurses and clerical workers in hospitals to
write out the same information six times in six different ways just
to satisfy some distant company or agency. It doesn't make sense,
and you shouldn't have to put up with it anymore. (Applause.)
Just listen to Joan Brown, a registered nurse who works
at a teaching hospital in Chapel Hill, North Carolina. She wrote to
the First Lady that she spends -- and I quote -- "more time with
paperwork than with any other aspect of health care." They've got a
joke at her hospital, she said, "We'll do the patient care after we
finish the paperwork, if we have time." It's not just a joke, it's a
sign of a crisis, and one we've got to do something about.
I visited Children's Hospital here in Washington last
year. The pediatrician, who is from this community and who is
dedicated her life to the children of this community, told me she
spends up to 25 hours a week filling out forms instead of tending
sick children. "It's not what we trained all these years to do, she
said. "Reducing paperwork would enable me to practice medicine
again. It would free me," she said, "free me from the shackles and
the burdens of the paperwork maze."
Let's be honest. In his wildest dreams, Rube Goldberg
could never have designed a system more complex than the present
health care system. (Applause.)
You in this room understand this better than anyone else
in the world today. You see the crisis when people without insurance
come to emergency rooms with serious injuries or illnesses. Many of
those illnesses could have been prevented if only they had been
covered and had access to a doctor, to primary and preventive care.
The emergency room is the most expensive place to treat people. It
should be reserved for emergencies. I know you believe that and you
can make sure it happened if everybody had access to health care
coverage.
You see the crisis when people come in who aren't fully
insured and you become loaded up with what's called uncompensated
care. The smallest estimate of that is $25 billion a year. It
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either come out of your budgets, which hurts your ability to provide
health care at a high quality, or you have to shift the cost on to
the bills of those who can pay them.
A lot of people who complain about hospitals
overcharging, about inflated bills, have no idea how much of this
cost shifting occurs simply because of the insurance setup that we
have in the United States. No other country in the world is burdened
with it. And we should not tolerate it any longer. (Applause.)
You also see it because a lot of the people who come to
you, either before they come or sometime during their treatment, deal
with the problems of preexisting conditions or lifetime limits on
insurance policies. Three out of four policies have such lifetime
limits. I know a lot of times you wind up having to send a
collection company after a patient that you know is not going to be
able to pay the bill anyway because of these problems.
You see this crisis when a doctor prescribes
prescription drugs, but then a person comes back to the hospital
three or four weeks later because she couldn't afford to fill the
prescription. So the illness got worse. One study says that
problems related to the lack of appropriate medication lie at the
root of up to 25 percent of all hospitalizations and cost over $21
billion a year. Our plan is the only one that takes account of this
and covers prescription drugs along with other medical services.
You see it with the crisis of violence in the emergency
room. We have to learn to treat violence as a public health problem.
Billions of dollars a year again are loaded onto the health care
system because we are the most violent country in the world. Many
people in health care supported the Brady Bill, support our attempts
to restrict assault weapons, to put more police officers on the
street. That also will help alleviate the health care problem. So I
hope you'll be out there after we deal with this the best we can also
supporting what the administration is trying to do on crime.
(Applause.)
I came here today once again to thank you for the work
you have done with us and to appeal once again for your support, for
the real battle is now being joined in Congress. And though we may
disagree about the details, we all agree the time has come to do
something. We have to do it now. And what we have to do includes
providing guaranteed private insurance to every single American.
That is what I need your help to do. (Applause.)
I implore you to go to Capitol Hill and tell your
members of Congress again what is going on in your hospitals. Go
home and talk to your friends and neighbors about it, and the people
who come in to your hospitals. Talk to business leaders in your
communities and local media people.
One of the biggest problems we have in this fight today
is that this issue is so complex and people are naturally enough so
concerned that they don't want to lose anything good that they have
now, that it is easy to confuse people about what the real issues and
the real facts are.
I love having a discussion with your representatives,
even if there is some disagreement around the edges of policy. We
come to the table with an accumulated knowledge of how the world
really works. Our biggest problem in passing this is that there are
too many people even in the Congress who have not had the opportunity
to study this program in all of its complexity. This is a tough,
tough issue.
And as I could tell from your applause, you know that
the most complex system that could ever be designed is not the one
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in the administration's bill, it's the one you're living with right
now. (Applause.)
Our approach is not to tell you how to deliver health
care, not to build barriers or bureaucracy. What we want to do is to
establish a framework in which people are covered, provide the right
incentives, help to remove the barriers to access, and get out of the
way. We agree that local community care networks must be the center
of any reform system. (Applause.) Groups of providers who see their
mission as keeping people well, treating the sick when they are sick,
and having the right incentives to do exactly that. We need to look
no further that your own NOVA award winners for examples of providers
who come together and make collaboration work.
One example, the Health Partners of Philadelphia, where
six urban teaching hospitals came together and worked together to
deal with violence and drugs and teen pregnancy in one community --
this is a very moving sort of thing. This can be done throughout
America. And we could do more of it if we covered everybody. It
would lower the cost to the overall health care system if we did it
because we could practice prevention, we could give more primary
care. The system as a whole would be less burdened, and we could
have more networks like the one in Philadelphia you have honored.
I know that many of you are already finding incredibly
creative ways to serve your community and are forming these networks.
That approach will be quite consistent with the administration's
approach. We helped to do that with clear incentives for people to
join together in networks and guarantees that when they do there will
be compensation there for the services that are provided. And we
agree that reform must simplify the system for you by reducing the
paperwork burden. There's no excuse for not having a single standard
form to replace the thousands of forms that exist today. And we want
to help you move forward with electronic billing, less regulation by
the government, and other ways to help get rid of some of this
paperwork hassle.
I am tired of trying to explain why we spend a dime on
the dollar more on paperwork, regulation and premiums than any other
country in the world and we still don't even cover everybody. It
cannot by explained so it should be changed. (Applause.)
And I want you to help me do something else, too, when
you go up to Congress. Ask every member of Congress, the next time
somebody comes to them and says, what we really ought to do is tax
the benefits, the health care benefits of middle class working people
-- say, well, before you tax the benefits of working people whose
wages have been stagnant for 20 years, why don't you ask how we can
justify spending a dime on the dollar more on paperwork, regulation
and insurance premiums than anybody else? That is waste. Why take
something away from hardworking people before you squeeze the system
and its unconscionable burdens on hospitals, doctors, nurses and the
American people themselves? That is where we ought to start.
(Applause.)
I also want to talk a little bit about the guarantee of
private insurance. Most people, under our approach, would get
insurance the same way they do today, through their employer. Each
consumer not an employer, not a bureaucrat -- would have a choice
of health care plans and doctors.
Let me point out something else on this choice. Today
-- today, 55 percent of the companies who insure their employees and
40 percent of the total work force insured through their employer
have no choice today in doctors or health plans. They take the plan
the employer has chosen. Under our plan, everybody would have at
least three choices of plans, including the right to simply pick a
doctor and have fee-for-service medicine. That is more choice than
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exists today, not less. Again, the rhetoric of people who have
attacked change defies the reality of what people face and deal with
in their daily lives in the health care system today.
Once someone has picked a plan, if they need to go to a
doctor for a checkup or if they get sick, they'll simply take a
health care security card, show it, and get the care they need. Then
they'll fill out one standard form, and they're done. That way, we
can go back to seeing hospitals as places of healing, not monuments
to paperwork and bureaucracy.
I have heard so many stories in so many hospitals, I
could keep you here all day laughing, but it would be like preaching
to the saved. (Laughter.) The only thing I want you to do is to go
tell the Congress about it, and that we can do better.
Last week when I spoke to Congress, I said that I would
veto any legislation that did not cover every American with
guaranteed insurance. (Applause.) Now, again I want to say that I
did that because you know that unless we do that we can't have
everybody playing by the same rules, using the same forms, ending the
cost shifting and getting people the preventive and primary care they
need so they don't simply wind up in the emergency room. That is,
all the systematic problems that the Hospital Association brought to
the administration when we began this discussion will continue unless
we provide coverage to everyone.
Now, again, I know there are issues to work out. There
are differences about what level of Medicaid savings can be achieved.
I'll tell you this -- our plan is the only one that takes the
Medicare savings and puts it back into the health care system, which
is very, very important. But the biggest thing you need to do, I
would argue, to get a good health care bill out of Congress is make
sure that the people in the Congress understand how the system works
today and what these various approaches would do if they were passed.
Yesterday, Families USA issued a very valuable document
which I just received a copy of this morning which takes 10 different
families, 10 different health situations and goes through in
practical terms how they would be affected if each of the major plans
now pending in the Congress were the law of the land. I would urge
you to read it. But it won't surprise any of you because you know
how the system works today.
Again, I implore you to take this debate to Congress,
get beyond the rhetoric, get beyond the ideology, talk to people in
the Congress about the American people and how the American health
care system affects them. That is the only way we can work through
the real problems as opposed to the imagined one.
One distinguished member of the House of Representatives
who represents a district with a wonderful teaching hospital and who
has been required by virtue of his membership -- his constituency --
to become an expert on health policy over the years, read our plan
the other day and he said, "It's the only one that really takes
account of so many different problems that most people don't even
know about. But I have no idea how to get my colleagues in the
Congress to take this issue seriously and spend all the time it would
take to absorb it all."
You can do that. Every member of Congress has a lot of
hospitals in his or her district. Every member of Congress basically
cares a lot about health care. And you can come to this debate with
a perspective that is not ideological, not partisan, has no axe to
grind, doesn't care who wins except the American people and the
American health care system. That's what you can bring to this
debate.
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So I would ask you, at a time when some say we just need
a little tinkering and others say there are ideological barriers to
changing it, I just want to say that Dick Davidson, your President,
in my view, said it as well as it could be said last December. He
said, "Comprehensive reform is what the American people are asking us
to do. To do nothing -- or worse, to fall back on simplistic
solutions -- only postpones and complicates our task." And that's
the truth.
Let us stand together for the health care of the
American people. We have a chance finally for the first time in
decades to do this right. You know what needs to be done. I pledge
to you an open door, a listening ear, a firm partnership. Let's go
out there and solve this problem for the American people.
Thank you very much, and God bless you. (Applause.)
END
10:40 A.M. EST
Richard J. Pollack
Executive Vice President
FYI
Federal Relations
it
AHA
American Hospital Association
Capitol Place, Building #3
50 F Street, N.W., Suite 1100
Washington, D.C. 20001
Telephone 202.638.1100
American Hospital Association
file
AHA
Capitol Place, Building #3
50 F Street, N.W.
Suite 1100
Washington, D.C. 20001
Telephone 202.638-1100
FAX NO. 202.626-2345
Statement
of the
American Hospital Association
before the
Subcommittee on Health and the Environment
of the
Energy and Commerce Committee
United States House of Representatives
on
Cost Containment in Health Care Reform
November 8, 1993
I am John G. King, President and Chief Executive Officer of
Legacy Health System, Portland, Oregon. Legacy is a health
system serving the Portland metropolitan area with four
hospitals, a home health program, and a network of physicians and
immediate and primary care clinics. I am here today, as a former
member of American Hospital Association Board of Trustees,
representing the American Hospital Association and its 5,000
member hospitals and health care organizations nationwide.
2
Members of this subcommittee and the full committee have worked
for many years in the effort to extend and improve health care
coverage for the nation. I know you share the American Hospital
Association's excitement about the real opportunity before us for
achieving that goal.
Blueprint for Real Health Care Reform
For more than two years, America's hospitals have worked to shape
our own blueprint for health care reform. As we see it, real
reform must achieve at least six objectives, and we will evaluate
every proposal based on its success in meeting them. They
include:
universal access in a reasonable time period
financed in a pluralistic manner;
redeveloping health care delivery into an
integrated and coordinated system able to address
the needs of the population;
economic discipline based on clear incentives
such as paying providers a fixed amount of money
to serve a defined population -- rather than
micromanagement;
balancing promised benefits with adequate financing;
public accountability for the clinical effectiveness
and economic efficiency of health plans; and
antitrust and medical liability reform.
3
In our view, these goals are interrelated. Achieving one at the
expense of another could place reform at risk. For example,
expanding access without 1) controlling the cost of care, and 2),
providing for adequate financing, would make the new benefits
vulnerable to attack for accelerating the growth of health care
spending. AHA's third goal -- economic discipline recognizes
that accelerating costs are unacceptable, and acknowledges that
the nation has a right to expect care to be delivered more
efficiently than in the past.
Society's Charge -- Containing Health Care Costs
Setting cost containment goals in a vacuum -- without considering
what it costs to provide care and streamline operations - could
have equally serious consequences for reform, undermining both
access to care and reform of the delivery system. If health
plans are underfunded, a health security card will do little to
ensure that enrollees receive the guaranteed national benefit
package, nor will it afford much security. We need an
appropriate level of resources to achieve fundamental reform.
For example, reconfiguring hospitals and other provider services
into more efficient cooperative arrangements takes both human and
financial resources. We know from experience that laying out a
solid plan for merging services between two hospitals, or between
a hospital and physician group, can take a year or more. The
infrastructure investments we all endorse in order to reduce
administrative costs -- electronic billing, computerized patient
4
records, new information systems - - also require appropriate
resources before they can be put into place.
Hospitals must have the resources to allow them to do this --
resources that could be freed up through the greater efficiencies
and lower administrative costs that are possible with real
reform. Managers in the system must have the tools and
flexibility to manage. They cannot reallocate all resources at
once. The payoff in terms of cost containment for the emphasis
on primary and preventive care comes long after the initial
investment of resources to provide such services. For example,
greater use of medically appropriate mammography would, over
time, improve detection of breast cancer at an earlier stage,
when it can be more successfully treated, and at a lower cost as
well. But in the short term, there would be an increase in
costs, as we pay for a greater number of screening mammograms.
If the financial environment is too constrained at the outset,
however, reform of the delivery system -- including shifting our
emphasis to early detection of disease -- may never get off the
ground.
Legacy Health System's Story
Let me turn the subcommittee's attention to the story of Legacy
Health System. At the outset, I said that Legacy Health System
was a four-hospital system with a network of physicians and
immediate and primary care clinics. It is Legacy's mission to
5
enhance the quality of life and improve the health status of the
community we serve. To accomplish these goals, we are developing
an integrated health care system designed to provide high quality
cost effective care by managing the care of the patients we
serve. Containing the cost of medical care requires innovation,
cooperation, and forging new partnerships. And we are succeeding
at Legacy. From fiscal year 1991 through fiscal Year 1993, our
cost per adjusted hospital admission rose only 4 percent. And
for fiscal year 1993 our cost per admission rose only six-tenths
of one per cent. Our financial plan released in April, 1993,
listed no price increases for hospital services. We expect our
financial plan for spring of 1994 will also have no price
increases. At Legacy, our cost containment effort is driven by
four strategies: managed care, continuous quality improvement
(called CQI Legacy), administrative consolidation, and
integration of clinical services.
Managed Care
For Legacy, managed care is more than Health Maintenance
Organizations (HMOs) and Preferred Provider Organizations (PPOs).
For Legacy, managed care is the management of medical treatment
and health care based on delivering medically appropriate care
that works in a cost-effective manner. The various health plans
that Legacy serves save our patients between 5 and 30 percent of
their historical health care costs. Our success in managing care
requires that the physicians, nurses, laboratory clinicians and
6
hospital administrators work in partnership to contain cost while
providing quality care.
CQI Legacy
Legacy's Continuous Quality Improvement Program (CQI Legacy) is
one of our principal levers in balancing quality and cost. CQI
Legacy ensures that the people who do the work have the power to
make positive changes. Because they know the most about their
jobs, they are best able to identify and remove problems and
improve productivity, make decisions and improve the quality of
care. Our efforts to maintain and improve the quality of the
care we deliver rely on research into the clinical outcomes of
procedures. To monitor and coordinate future outcomes research
throughout Legacy, we created a council for outcomes research.
Administrative Consolidation
Our first steps toward consolidation began with merging the three
downtown Portland hospitals -- Emanuel, Good Samaritan, and
Holladay Park. We merged administratively into one hospital
operating on three sites. We then merged the medical staffs of
the three hospitals into a single medical staff. And we went on
to merge other functions, such as purchasing and material
services, Legacy Health Plans management, and planning and
resource allocation.
7
We were then faced with the hard fact that the Portland area has
far more hospital capacity than needed to serve both its current
and projected populations. This fact, added to the nationwide
shift from inpatient surgery to outpatient procedures, led us to
announce the closing of one of our three hospitals, Holladay Park
Medical Center. Our previous integration of its services into
the larger whole meant that Holladay Park's closure could be
handled with minimal disruption to patients. Legacy now leads
the region in reducing duplication of services and integration of
health care delivery.
Integration of Clinical Services
In addition to the consolidation of the medical staffs of
Portland's downtown hospitals, we are integrating the clinical
services of other hospitals and providers. Legacy's partnership
with primary care and specialty physicians in the Portland area
assures that our community has access to primary, secondary, and
tertiary health services. Mount Hood Medical Center and Meridian
Park Hospital offer primary and secondary services to the growing
populations east and south of Portland. A network of physicians'
office buildings, immediate care clinics, occupational medical
clinics and residency-based primary care clinics weave the system
together.
8
Partnership with employers is also key to the success of Legacy.
We have forged an agreement with Portland's Precision Castparts
Corporation that will use highly innovative approaches to contain
the cost of health care while improving the health status of the
company's employees. For example, we're conducting a health
status survey of all employees, and then monitoring the
improvement we expect to see after intensive preventive and
wellness programs are implemented.
It is important to note that the Portland area is a mature
managed care environment with a high penetration of Health
Maintenance Organizations and Preferred Provider Organizations.
Providers serving the Portland area have learned to provide
health care within a fixed budget system through some form of
capitation in a highly competitive market. This is a direct
example of marketplace incentives at work. By integrating health
care delivery and restructuring internal operations, we have been
able to maintain high quality care while containing cost to the
patient and the system.
Cost Containment Strategies
As it considers how best to contain costs, this subcommittee will
be forced to choose between two fundamentally different
approaches. The first involves writing some sort of arbitrary
limit (or limits) on health care spending into the law, based on
some notion of the appropriate rate of growth for this sector of
9
the economy or on the need to generate sufficient savings to
offset any new Federal budget costs generated by reform. A limit
of this sort could be imposed on insurance premiums or on
payments for health care services, but both approaches would be
driven by a formula based on factors having little to do with the
actual delivery of care. Their rigid application may seriously
penalize those providers who have made conscious and appropriate
efforts to reduce costs.
The second approach involves achieving some economic discipline
immediately by reforming the way health services are paid for and
provided, while simultaneously establishing a process - - not a
formula -- under which an independent national commission
evaluates the level of payments in light of the benefits to be
provided.
This latter approach, which AHA favors, would achieve cost
containment by giving providers the economic incentive to work
together in health plans or community care networks --
cooperating groups of local providers paid on a capitated, or
per-person, basis -- to eliminate expensive duplication of
services and technology and establish a seamless system of care
that works better for patients. In our view, health plans would
then be working under incentives to manage care, rather than
managing providers and patients.
10
Let me use the Portland area as a case in point. Nearly 41% of
the Portland area population under age 65 is enrolled in HMOs.
Another 44% is enrolled in PPOs. Of those over age 65, close to
56% are enrolled in an HMO Medicare plan. This managed care
phenomenon results in significantly lower hospital utilization,
which of course reduces health costs. Portland's inpatient days
per 1,000 persons is 435, compared to the U.S. average of 890
days per 1,000. Average length of the hospital stay is 4.7 days,
versus 7.3 days for the nation as a whole. We are convinced that
properly constructed economic incentives that pay providers a
fixed amount of money to serve a defined population work as a
cost containment methodology.
And we're just as convinced that what doesn't work is the kind of
government micromanagement or price controls that are likely to
be the enforcement mechanism if we try to achieve cost
containment through arbitrary federal limits on health care
spending. As all price controls imposed in the last 25 years
have shown, incentives for innovative programs and improved care
would be sidetracked and replaced by strategies to survive and
outsmart the regulators. Rate setting in health care would
create underfunding, promote unbundling of services and therefore
expand utilization, and would subject the well-being of patients
to the political process.
11
A better approach is to establish a process for evaluating health
care spending in light of benefits. This avoids the risk
inherent in guessing far in advance -- what the appropriate
level of health care spending should be for a particular year.
And it would enable policymakers to achieve a better balance
between promised benefits and adequate funding by basing their
decisions on better, more recent information on demographic
changes, scientific and technological advances, developments in
productivity and quality of care, and other relevant factors.
Cost Containment Strategies in Current Proposals
AHA has serious concerns about those health care reform plans now
before Congress that would achieve cost containment with a
formula-driven approach. Although some believe the President may
have backed away from the explicit Medicare and Medicaid caps
proposed in the September 7 draft version of his plan, there are
nevertheless strong limits on spending in the President's bill.
There is a limit on the amount employers can spend; there is a
limit on the amount employees can spend; there is a limit on the
federal government subsidy for low-income people and for small
business. And, there are extraordinary reductions in Medicare
and Medicaid payments to hospitals. The reform proposal of the
Senate Republican Task Force on Health also suggests reductions
in spending for both the Medicare and Medicaid programs.
Sponsors of the bi-partisan Managed Competition Act of 1993,
12
introduced by Rep. Jim Cooper (D-TN) and Rep. Fred Grandy (R-IA),
have also been active in advocating reductions in Medicare and
Medicaid payments.
While the goal of these proposed Medicare reductions is to
squeeze out waste, none of these plans propose applying to
Medicare the same economic incentives that would promote
efficiency in the rest of the health care system. Instead, these
spending reductions are to be carried out through a series of
arbitrary and technical changes. These changes are not intended
to fix what's wrong with the Medicare program. Instead, their
purpose is to fund the new federal costs associated with reform.
While there may be merit to the new benefits funded by these
cuts, we can't support underpaying hospitals in order to finance
them.
A similar disconnect of actual needs from resources happens on
the private side of the Clinton proposal, where spending growth
is capped by tying it to the Consumer Price Index (CPI). But the
CPI has no real link to the actual costs of providing health
care; health care has its own set of input costs that aren't
reflected in the CPI -- labor costs that are driven up by health
personnel shortages and the steeply rising cost of new medical
technology, for example. This is a particular problem in the
early years of reform when the health care delivery system would
have to adapt to massive changes.
13
Another example of the shortcomings of rigid spending limits is
the proposed cap on Federal subsidies to low-income individuals
and small, low-wage businesses under the Clinton plan. In an
effort to provide fiscal certainty to the Federal government, the
plan would strip away any sense of security these groups might
have by requiring that the subsidies they were depending on be
scaled back if demand proved greater than anticipated. This
would apparently occur regardless of whether the pressure on
subsidy funding was caused by a failure to control health
premiums adequately, or by more individuals qualifying for a
subsidy because of changing economic conditions, such as would
happen with a higher unemployment rate.
We agree on the need to slow health spending growth. But who
among us sitting here today could say with any certainty what
health spending should be five or six years from now? To try to
control spending through a rigid formula amounts to putting the
system on cruise control, taking one's hands off the steering
wheel, and hoping for the best. That is not a responsible way to
navigate in the uncharted territory of health care reform. Why?
Because it doesn't allow us to adjust course to accommodate
unforeseen circumstances. The slowness of the economy in coming
out of the recession, unanticipated crises such as the AIDS
epidemic -- all caution that we keep our hands firmly on the
steering wheel. And the way to do that is to match health needs
with available resources in an on-going, open and public way.
14
In our view, that should be the job of an independent national
commission.
Conclusion
To sum up, hospitals recognize that moderating growth in health
care costs is a legitimate national need. Our long experience in
health care delivery tells us, however, that significant cost
containment will not be achieved by half-measures. Significant
savings can only be achieved by bold strokes -- by realigning
today's perverse financial incentives that send hospitals in one
direction; physicians in another.
We believe that capitated payment to a community care network™ -
- a per person fee paid to a cooperating group of health care
providers -- does the best job of realigning those incentives.
Our track record at Legacy Health System shows that provider
integration and cooperation can result in significant savings.
We also understand your need to have a reasonable idea of the
federal government's financial exposure when we restructure the
one-seventh of the economy that is our health care system. We
urge you to reject the simplistic notion of setting an arbitrary
limit on health care spending. Such a limit does not allow for
mid-course corrections when unexpected circumstances arise, and
it does not preserve the very necessary link between spending and
people's actual health needs.
15
Instead we strongly believe that putting in place the right
incentives and allowing savings to flow from the grassroots up --
and Legacy Health System's cost containment record shows that
this approach works -- allows us to achieve a very important
goal: making sure that promised benefits have adequate
financing. Without that balance, our shared vision of giving
every American health security could become only a hollow
promise.
CCN, Inc. and San Diego Community Healthcare Alliance use the name Community
Care Network as their service mark and reserve all rights.
P.2/11
NOV 18 '93 01:12PM AHA EXEC. OFFICES
file
American Hospital Association
AHA
Capitol Place. Building #3
50 F Street. N.W.
Suite 1100
Washington, D.C. 20001
Telephone 202.638-1100
FAX NO. 202.626-2345
November 16, 1993
The Honorable Thomas S. Foley
U.S. House of Representatives
Washington, DC 20515-4705
Dear Representative Foley:
The House will soon be asked to consider an amendment to H.R. 3400, the
"Reinventing Government" bill, to reduce spending in federal programs by $100
billion over the next five years. On behalf of the American Hospital
Association's (AHA), nearly 5,300 institutional and 45,000 individual members,
I am writing to express our strong opposition to this proposal and to urge you
to vote against it.
At the outset, let me say that the AHA shares Congress' frustration with the
government's inability to control the federal budget deficit and understands the
pressures that are leading members to embrace various measures designed to
reduce spending. However, it is our belief that the Penny-Kasich plan will do
our nation more harm than good by seriously impeding our nation's efforts to
slow health care spending through meaningful health care reform.
While the Penny-Kasich amendment proposes to reduce the federal budget
deficit by enacting piecemeal changes in the Medicare program, those changes
fail to address the underlying causes of health care inflation. Hospitals are
concerned about the spiralling costs of health care, but recognize that the only
way in which we can achieve sustained deficit reduction over time is through
comprehensive health care delivery reform.
The Penny-Kasich amendment seeks an additional $50 billion in entitlement
savings, including $37 billion from the Medicare program. The AHA believes
these reductions to Medicare would be unwise policy, especially as we attempt
to reform our health care delivery system. In addition, the effects of the
reductions would be compounded by the $56 billion in Medicare savings already
achieved in the last budget round under OBRA 1993 (P.L. 103-66) -- on top of
P.3/11
NOV 18 '93 01:13PM AHA EXEC. OFFICES
$43 billion included in the OBRA of 1990. Most of the reductions in OBRA
1993 will take effect in the out-years of 1996-1998. Stripping an additional
$37 billion from Medicare, as provided in the Penny-Kasich amendment, will
certainly compromise the ability of many facilities, including those that treat
large numbers of low-income patients and teaching hospitals, to continue to
provide services to expanding populations.
Moreover, the amendment would throttle rather than advance comprehensive
health care reform. Under the amendment, the Medicare savings would be
directed towards deficit reduction rather than reinvested in health care reform.
And that will require Congress to look elsewhere in order to finance health care
reform -- higher taxes, deeper Medicare cuts, or scaling back health care
benefits.
America's hospitals believe that now is the time to reform the way we deliver
health care. But, expanding the covered population, restructuring the health
care system, reconfiguring hospitals and other services for the future, and
investing in new technologies to meet the demands of the new system will
require adequate resources. The AHA believes that if any savings are targeted
from the Medicare program, they should be reinvested in health care reform, not
targeted for deficit reduction as proposed by this amendment.
In closing, the AHA urges you to carefully consider the serious consequences of
adopting the Penny-Kasich proposal as a means of reducing the federal budget
deficit. We believe that any changes to the Medicare program should be
considered within the context of achieving comprehensive health care reform.
Sincerely,
Rid Polland Pollack
Rick Pollack
Executive Vice President
Federal Relations
P.4/11
NOV 18 '93 01:13PM AHA EXEC. OFFICES
American Hospital Association
AHA
Advocacy Action Plan
Washington Office
An advocacy strategy to help hospitals
Capitol Place, Building #3
serve their communities.
SOF Street, N.W., Suite 1100
Washington, D.C. 20001
Telephone 202.638-1100
MEDICARE REDUCTIONS
Oppose Penny-Kasich Amendment
to the "Reinventing Government" Bill (H.R. 3400)
November 17, 1993
Special Attention: Swing Vote States
See Attached List
ISSUE
This Advocacy Action Plan requests assistance from allied hospital associations in opposing an
amendment to use $37 billion in Medicare savings for deficit reduction. AHA is requesting that
opposition be generated in response to proposals that would result in further Medicare savings.
BACKGROUND
During consideration of the budget reconciliation bill last August, President Clinton made a
number of commitments to lawmakers to ensure its passage. Among these was a promise that
lawmakers would be afforded another opportunity to reduce the deficit in exchange for their vote
on the budget bill.
President Clinton kicked off the second round of budget action with his "Reinventing
Government" proposal, introduced in the House as H.R. 3400. A bi-partisan group of
conservative House members, led by Representatives Tim Penny (D-MN) and John Kasich (R-
OH), will offer an amendment calling for $100 billion in additional spending reductions over the
next five years when H.R. 3400 is considered on the House floor later this week.
P.5/11
NOV 18 '93 01:14PM AHA EXEC. OFFICES
2
The Penny/Kasich amendment seeks an additional $37 billion in Medicare savings, which would
come on top of the $55.8 billion in savings approved last summer as part of the Omnibus Budget
Reconciliation Act of 1993. With respect to Medicare, the Penny/Kasich proposal would:
impose a 20 percent coinsurance requirement on clinical lab services;
impose a 20 percent coinsurance requirement on home health services (exempting those
below 150 percent of the federal poverty level);
means-test the Part B premium for beneficiaries with an annual income of $75,000
(individuals) and $100,000 (couples); and
means-test the Part A deductible for beneficiaries with an annual income of $75,000
(individuals) and $100,000 (couples).
At the same time, the Administration has included some of these savings as part of its health care
reform proposal. Although hospitals would not be directly affected by these proposals, AHA
believes that the Penny/Kasich amendment has serious implications for health care reform. If
the amendment is passed, the savings would be earmarked for deficit reduction rather than health
care reform, thus making comprehensive health care reform even more difficult to finance.
By using these savings for deficit reduction, Congress and the Administration will be left with
very few options to find the additional resources necessary to pay for health care reform and be
forced to consider even more troublesome options such as: imposing even deeper Medicare cuts
than the $124 billion currently proposed; or retreating from the commitment to universal access.
Moreover, as past experience reminds us, Congress and the Administration are only too willing
to turn to the Medicare program--and providers, in particular--to find additional savings.
The House is scheduled to consider H.R. 3400 after the vote on the North American Free Trade
Agreement. The vote could be as early as Friday (November 19) or Saturday (November 20).
WHAT YOU CAN DO TO HELP
Please work with your hospital grassroots contacts to urge your representatives to oppose the
Penny-Kasich amendment to H.R. 3400. While it would be helpful if every House member in
your state be advised of the hospital position on this issue, it is absolutely critical that those
members who appear on the attached targeted list of potential "swing" votes receive priority
attention. Attached is a list of talking points to assist in communicating the hospital position.
P.6/11
.NOV 18 '93 01:14PM AHA EXEC. OFFICES
3
STAFF CONTACTS
Please refer questions and any feedback to your regional director or Washington-based regional
liaison.
Thanks again for your assistance and quick response on this important issue. We recognize the
many pressures you face and appreciate your efforts.
Rick Pollack
Executive Vice President
Federal Relations
Attachments
P.7/11
NOV 18 '93 01:15PM AHA EXEC. OFFICES
Talking Points in Opposition to the Penny-Kasich Amendment
to H.R. 3400, the "Reinventing Government" Bill
Just last summer, Congress approved the Omnibus Budget Reconciliation Act of
1993 which reduces Medicare spending by $55.8 billion over the next five years.
Those reductions come on top of the $43 billion in Medicare savings enacted as
part of the 1990 budget agreement.
The Penny/Kasich amendment would reduce the federal budget through piecemeal
changes in Medicare--changes which fail to address such underlying causes of
health care inflation as an aging population, increased utilization and intensity of
services, and new, innovative technology that keeps our health care system on the
cutting edge of scientific development.
The Penny/Kasich amendment would impede efforts to achieve comprehensive
health care reform. Channeling $37 million of Medicare savings into deficit
reduction activities will make it more difficult to finance the changes that are
needed to bring about reform. It would force Congress and the Administration
to consider some undesirable financing options, including another round of
Medicare reductions; or retreat from the commitment to universal access.
The Medicare payment system is broken and continued tinkering won't fix it. It's
time to move forward with comprehensive delivery system reform. Only by
restructuring our health care delivery system can we pave the way to genuine
health care cost-containment and deficit reduction.
Historically, Medicare and Medicaid have seriously underpaid most of America's
providers for the care they render. In 1991, according to the Prospective Payment
Assessment Commission (ProPAC), nearly two-thirds of all hospitals lost money
treating Medicare patients. Furthermore, average Medicare PPS operating
margins in that year were -3.4 percent, and ProPAC estimates that those numbers
will fall to -9.9 percent in 1993.
P.8/11
NOV 18 '93 01:15PM AHA EXEC. OFFICES
Potential "Swing Votes"
Penny/Kasich Amendment to H.R. 3400
Alabama
Georgia
Michigan
Browder
Bishop
Upton
Cramer
McKinney
Rowland
Minnesota
Arizona
Illinois
Minge
Coppersmith
Peterson
Costello
Arkansas
Guiterrez
Missouri
Lipinski
Dickey
Poshard
Danner
Lambert
Reynolds
Skelton
Thornton
Rush
Volkmer
Porter
Florida
Nebraska
Indiana
Brown
Hoagland
Deutsch
Hamilton
Hastings
Long
New Jersey
Hutto
Myers
Meek
Sharp
Andrews
Thurman
Hughes
Johnston
Kentucky
Klein
Young
Menendez
Stearns
Baesler
Pallone
Shaw
Barlow
Roukema
Mazzoli
Saxton
California
Louisiana
New York
Becerra
Beilenson
Hayes
Hinchey
Condit
Tauzin
Maloney
Dooley
Nadler
Eschoo
Massachusetts
Valazquez
Farr
Lazio
Filner
Kennedy
Paxon
Hamburg
Meehan
Gilman
Lehman
Boehlert
Roybal-Allard
Houghton
Tucker
Molinari
P.9/11
NOV 18 '93 01:16PM AHA EXEC. OFFICES
North Carolina
Virginia
Lancaster
Payne
Valentine
Pickett
Scott
North Dakota
Pomeroy
Wisconsin
Ohio
Barca
Barrett
Applegate
Gunderson
Mann
Strickland
Pennsylvania
Blackwell
Coyne
Holden
Kanjorski
McHale
Murphy
McDade
Goodling
Ridge
Greenwood
Texas
Chapman
de la Garza
Edwards
Geren
Green
Hall
Johnson
Laughlin
Ortiz
Pickle
Bonilla
Sarpalius
Tejeda
Wilson
P.10/11
NOV 18 '93 01:16PM AHA EXEC. OFFICES
AHA REGIONAL OFFICES
REGION 1
States in Region 1
Director: Jack F. Barry
Connecticut
Maine
Five New England Executive Park
Massachusetts
Burlington, MA 01803-5006
New Hampshire
Phone: 617/272-0787
Rhode Island
Fax: 617-273-3708
Vermont
REGION 2
States in Region 2
Director: William C. Christenson
New Jersey
New York
760 Alexander Road, CN-1
Pennsylvania
Princeton, NJ 08543-0001
Phone: 609/452-9270
Fax: 609/452-8353
REGION 3
States in Region 3
Director: Cal L. Simpson
Delaware
District of Columbia
Capitol Place, Building #3
Kentucky
50 F Street, N.W., Suite 1100
Maryland
Washington, D.C. 20001
North Carolina
Phone: 202/626-4637
Virginia
Fax: 202/626-2345
West Virginia
REGION 4
States in Region 4
Director: J. Frank Meisumer
Alabama
Florida
4360 Garryetown Square, Suite 817
Georgia
Atlants, GA 30338-6220
Mississippi
Phone: 404/936-0331
Puerto Rico
Fax: 404/936-0333
South Carolina
Tennessee
REGION 5
States in Region 5
Director: Nancy S. Shlaes
Illinois
Indians
840 N. Lake Shore Drive
Michigan
Chicago, IL 60611
Ohio
Phone: 312/280-6661
Wisconsin
Fax: 312/280-3554
P.11/11
.NOV 18 '93 01:16PM AHA EXEC. OFFICES
AHA Regional Offices
Page 2
REGION 6
States in Region 6
Director: Jack D. McFadden, Ph.D.
Iowa
Kansas
One Ward Parkway, Suite 105
Minnesota
Kansas City, MO 64112
Missouri
Phone: 816/561-0501
Nebraska
Fax: 816-753-4688
North Dakota
South Dakota
REGION 7
States in Region 7
Acting Director: J. Frank Meisamer
Arkansas
Louisiana
1431 Greenway Drive, Suite 325
Oklahoma
Irving, TX 75038
Texas
Phone: 214/550-1520
Fax: 214/550-1942
REGION 8
States in Region 8
Director: Marcia L. Desmond
Arizona
Colorado
2955 Valmont Road, Suite 300
Idaho
Boulder, CO 80301
Montana
Phone: 303/440-4340
New Mexico
Fax: 303/440-0788
Utah
Wyoming
REGION 9
States in Region 9
Director: Anthony J. Giardina
Alaska
California
1201 K Street, Suite 800
Hawaii
Sacramento, CA 95814
Nevada
Phone: 916-447-7262
Oregon
Fax: 916-448-4519
Washington
File
bc-hospital-statement 10-27
Statement by President of American Hospital Association on Clinton Health
Care Reform Proposal
To: National Desk
Contact: Carol Pearson, 202-626-2342,
Alicia Nulty, 202-626-2339,
William Erwin, 202-626-2284,
all of the American Hospital Association
WASHINGTON, Oct. 27 /U.S. Newswire/ -- Following is a statement from
American Hospital Association President Richard J. Davidson on President
Clinton's Health Care Reform proposal:
The Clinton administration's health reform legislation holds out the
promise of health security for all Americans. But in offering an unrealistic
way to pay for it, it's a promise destined to be broken. In short, September's
expectations have become October's disappointments. The president's
legislation seems to take a step back from his earlier commitment to genuine
health care delivery system reform. While President Clinton says that he's
going to issue every one of us a health security card, what he hasn't told the
American people is that the card won't be worth the plastic it's printed on if
we can't pay those bills down the road.
Here's why:
-- The president's legislation overpromises Americans health security by
underfunding Medicare and Medicaid and by capping the federal subsidies
intended to help small businesses and low- income people buy insurance.
Restraining projected Medicare spending by $124 bilion over the next five
years is unacceptable. It punishes the growing number of elderly people and
the hospitals that serve them. These cuts will especially hurt the most
vulnerable hospitals -- those serving inner city and rural populations.
-- President Clinton's reform legislation would leave Medicare out of a
reformed health system. Segregating Medicare would lock into place the
inefficiencies, waste, and conflicting incentives that now pervade the
program. As a result, older Americans could well see Medicare deteriorate
into a substandard program paying only for bare bones care.
-- By stretching out the transition to universal coverage one year beyond
his original goal, the president has signaled his willingness to negotiate,
and possibly compromise, with his critics on this cornerstone issue of access
to health coverage.
-- President Clinton has scuttled his original plan for an independent
national health commission, which we had hoped could be the forum for matching
health care needs with available resources in an on-going, open, and public
way. Instead, the legislation would deminish the board's clout by turning it
into an Administration `steering committee'' reporting directly to the
President. The public loses.
Hospitals will continue to play a constructive role in helping shape
reform. We have our own firmly-grounded set of reform principles that serve as
our guide:
-- universal access in a reasonable time period financed in a pluralistic
manner;
-- redeveloping health care delivery into an integrated and coordinated
system able to address the needs of the population;
-- economic discipline based on clear incentives rather than
micromanagement, incentives such as paying providers a fixed amount of money
to serve a defined population;
-- balancing promised benefits with adequate financing;
-- public accountability for the clinical effectiveness and economic
efficiency of health plans;
-- antitrust and medical liability reform.
It is these principles that today lead us to conclude that the Clinton
legislation is a step away from our goals. But hospitals' reform principles
will also enable us to continue to take part in the legislative give-and-take
that will now begin in earnest. We continue our pledge to President and Mrs.
Clinton to strongly support those parts of the proposal that we can, and work
in a constructive manner to reach consensus where we disagree.
-0-
/U.S. Newswire 202-347-2770/
**** filed by:US-F(--) on 10/27/93 at 19:40EST ****
**** printed by:WHPR(JOPP) on 10/28/93 at 06:41EST ****
HEALTH CARE PURCHASING ALLIANCES
AHA POSITION
BACKGROUND
AHA envisions a
Many of the key "managed competition" proposals for health care reform now being considered
reformed health care
by Congress rely on purchasing cooperatives (either mandatory or voluntary) as a mechanism
for purchasing health coverage. These cooperatives are intended to pool risk and consumer
system in which
purchasing power to make coverage more affordable. The extent to which these cooperatives
employers and
play additional roles will be a defining issue of any reform plan. The debate will focus on
individuals contract
placing the role of the cooperative somewhere along a continuum that ranges from a purely
directly with
administrative function at one end to a planning and resource-allocation regulator at the
other end.
community care
networksᵀ for the
The purchasing cooperatives outlined in the Administration's plan are called "regional
provision of health
alliances." States would have the option of creating alliances as either state agencies or
independent non-profit corporations and of determining how many alliances will operate within
services. We favor the
their borders.
creation of insurance
pools to make coverage
Some alliance activities- conducting an annual enrollment, collecting and disbursing funds,
and risk-adjusting payments to health plans according to federal guidelines - - are, for the most
more affordable for
part, necessary functions in any reformed health system. The additional roles envisioned for the
small businesses and
alliances under the Administration's plan, however, represent a more active intervention in the
the self-employed.
health delivery system. Under the Clinton plan (Mitchell-S.1757; Gephardt-H.R.3600) these
roles include:
Our reform proposal
does not call for the
Negotiating health plan premium bids
creation of health care
Negotiating a maximum fee schedule for fee-for-service care
purchasing "alliances,"
as does the
Ensuring the availability of health plans in undeserved areas
Administration's plan,
At state option, setting provider rates and limiting plan enrollment
and we have specific
concerns about their
Enforcing global budgets
scope. It is possible,
All these roles add up to an unreasonable level of responsibility for a brand new entity. And
however, that we could
most Americans, except for Medicare beneficiaries and those employed by the largest firms,
support the concept if
would have to use the alliances to purchase coverage.
changes are made to
In place of the Administration's "alliances," the Chafee/Dole (S.1770) proposal envisions
address our concerns.
voluntary cooperatives for individuals and small businesses with fewer than 100 employees. And,
to handle the alliance function, the Cooper/Grandy bill (H.R.3222) creates mandatory
purchasing cooperatives with exclusive geographic franchises for businesses with fewer than 100
employees. These cooperatives can be increased at state option to a size sufficient to enroll no
more than half of all the employees in that state.
file
AHA
Continued on reverse side.
HEALTH CARE PURCHASING ALLIANCES
RECOMMENDATION
The size of health alliances should be limited to serve only small businesses and individuals.
They should have a limited administrative role, rather than a regulatory role. Their scope
should be limited to four basic functions:
Serve as a risk pool for small businesses and individuals
Offer an open enrollment period with the opportunity to join any of the qualified health plans
Disseminate easily comparable data on quality, cost and enrollee satisfaction to the public
about each plan
Collect community-rated individual and small business premiums and distribute risk-adjusted
premium amounts to the health plans
Community Care Nerwork. Inc.
uses the name Community Care
Network as its service mark and
reserves all rights.
ANTITRUST
AHA POSITION
BACKGROUND
Antitrust policy should
With the advent of health care reform, an increasing number of hospitals are exploring
allow hospitals and
innovative ways to cooperate with one another in serving their communities. For example,
hospitals may wish to share services and equipment or agree to emphasize different specialties as a
their communities the
way to avoid expensive duplication of technology and services. Some hospitals consider mergers
flexibility to assess local
as a way to reduce excess capacity. And most importantly, hospitals and other providers are
health care needs and
seeking to form provider networks to offer comprehensive care, from preventive services through
long-term care, in a seamless setting.
implement strategies to
address those needs.
Many of these collaborative initiatives, however, may be challenged at the federal level by the
Hospital goals include
Department of Justice (DOJ) and the Federal Trade Commission (FTC) on antitrust grounds. In
addition, state enforcement agencies and private parties can challenge activity. In light of these
reducing expensive
risks, lack of adequate antitrust guidance specific to health care has "chilled" health care
overcapacity and
providers from pursuing many cooperative activities.
unnecessary
Both Democratic and Republican Members of Congress showed support last year for
duplication of services
accommodating antitrust restrictions to the unique needs of health care providers. Various
and technology to more
legislative proposals were introduced and congressional hearings held to explore the antitrust
efficiently provide
issue. And an early draft of the President's health care reform proposal called for the federal
enforcement agencies to issue antitrust guidelines in a variety of areas.
health services.
Changes and
On September 15, 1993, these agencies took a first step and jointly issued six "Policy Statements"
clarifications in the
on antitrust enforcement in the health care area. The statements address the following areas:
hospital mergers; hospital joint ventures involving high-tech or expensive equipment; physicians'
antitrust area can help
provision of information to purchasers of services; hospital participation in exchanges of price
implement AHA's
and cost information; joint purchasing arrangements among health care providers; and physician
reform vision of a
network joint ventures. Each Policy Statement carves out an "antitrust safety zone" describing
conduct that the agencies will not challenge, absent extraordinary circumstances.
restructured health care
delivery system based
An important component of the statements is the expedited review process established to answer
on provider cooperation
providers' questions about proposed activity. Generally, questions on issues addressed in the
statements will be answered within 90 days; questions on non-merger activity not addressed in
through "community
the statements will be answered within 120 days.
care networks."sm
While these Policy Statements represent progress, some key issues are not addressed in them,
most notably: how the enforcement agencies will view the antitrust issues inherent in forming
provider networks. DOJ and FTC have agreed to continue working with AHA to develop
additional guidelines in a timely fashion. In addition, we continue to monitor other efforts in
Congress to address antitrust issues within the context of health care reform legislation.
RECOMMENDATION
If providers are going to work together to put the health care delivery system on a more rational
foundation, additional detailed guidance from the federal enforcement agencies is necessary.
Guidelines must adequately address all relevant issues and be consistent with the health care
reform efforts underway. While the Policy Statements issued by DOJ and FTC represent a step in
the right direction, various issues remain and much work lies ahead. Additionally, in order to
remove the chilling effect that discourages some innovative arrangements, any federal guidance
needs to prove effective for state and private party challenges. And policymakers need to be
aware that reform proposals being developed often raise antitrust issues that will need to be
Community Care Network, Inc.
reconciled in any final health care reform plan. These combined efforts will help to realize a
uses the name Community Care
more effective and efficient community-focused health system.
Network as its service mark and
reserves all rights.
COMMUNITY CARE NETWORKS
AHA POSITION
BACKGROUND
AHA's health reform
The AHA supports providing care in a more integrated and coordinated way so that patients can
vision calls for
receive better, more cost-effective care and the nation can begin to slow the rate of growth in
health care spending. All three of the reform proposals in the political center - Administration,
restructuring the
Chafee, and Cooper - - could accommodate our "community care network" approach to an
delivery system through
integrated health care delivery system. In addition, all three bills contain incentives to move
"community care
toward integrated care in their insurance reform provisions.
networks" - groups
The Administration's bill proposes broadly-defined "Health Plans." While the bill does not
of local health care
preclude the formation of integrated delivery systems, it does not contain strong incentive to
providers, social service
create them. The Chafee bill's "Qualified Health Plans" and the Cooper bill's "Accountable
Health Plans" would also accommodate our vision of community care networks but do not
agencies, community
contain strong incentives to create networks.
organizations, and
others who work
Insurance reforms in all three bills do, however, help reinforce movement toward integrated care.
together to integrate
For example, the insurance reforms included in the President's proposal begin to change
incentives and move the health care system in this direction. By prohibiting discriminatory
their services and
insurance practices - the use of pre-existing condition clauses, for example - insurers are
thereby provide a
required to manage rather than avoid risk. In order to better manage risk, health plans will have
seamless system of care
to better manage care, and that means forming partnerships with local provider networks to give
care in a more integrated way. The Chafee and Cooper proposals also prohibit discriminatory
for consumers.
insurance practices and thus contain similar incentives for insurance market restructuring.
RECOMMENDATION
Any final reform proposal must contain more federal guidance for qualification as an integrated
health plan. Specifically, health plan criteria should ensure that health plans have incentives to
provide coordinated care, stimulate providers to work together, and encourage the use of
capitated payment (setting a fixed, up-front fee for each enrollee). Criteria should also ensure
that plans are held accountable to the enrollees they serve.
Community Care Network, Inc.
uses the name Community Care
Network as its service mark and
reserves all rights.
GLOBAL SPENDING CAPS
AHA POSITION
BACKGROUND
The AHA is strongly
The President's plan (Mitchell-S.1757; Gephardt-H.R.3600) calls for limits on the growth of
opposed to global
health spending in the private sector through the establishment of a global budget enforced by
budget approaches that
premium caps. Under the President's proposal, after a relatively short transition period, annual
health insurance premium increases would be limited to the increase in general inflation as
are arbitrary and have
measured by the Consumer Price Index, or CPI.
no relationship to
While we understand the need to slow the growth in health care spending, we have serious
patient needs.
concerns about the rigidity of the President's top-down, formula-driven global budget proposal.
The CPI has no real link to the actual costs of providing care. Health care has its own set of
The President and
input costs that aren't reflected in the CPI, including labor costs driven up by health care
several influential
personnel shortages, and by the steeply rising cost of new medical technology.
leaders in Congress are
Attempting to slow the growth in health spending through a rigid formula amounts to putting
calling for strict limits
the system on cruise control, taking one's hands off the steering wheel, and hoping for the best.
Such an approach will not allow us to adjust course to accommodate unforeseen circumstances,
on the growth of health
such as sudden downturns in the economy that swell the ranks of the uninsured; previously
spending in public
unknown crises such as the AIDS epidemic; and other factors causing health spending to increase
health programs and in
that are beyond hospitals' control.
the private sector as
well through the
establishment of a
RECOMMENDATION
"global budget." That
We believe that there must be a direct link between promised health benefits and the costs
is, through setting a
of providing those benefits, as well as flexibility to be able to respond to changing health
fixed, up-front amount
spending needs.
that can be spent for
Instead of acting as rigid caps on the rate of increase in private-sector health care premiums,
the nation. While we
global budget targets could serve as a measure of annual health spending increases for publicly
recognize the need to
subsidized health care expenditures those directly subsidized by government appropriations,
moderate the growth in
and those indirectly subsidized through the provision of tax-free benefits. Global budget targets
should be flexible and take into account the health needs of the population, changes in
health spending, our
demographics, technological advances, and other factors that an independent national health
own vision of health
commission determines are appropriate.
care reform calls for
If health spending increases exceed the global budget target in a given year, it would be the job of
serious cost
the independent commission to make the tough choices that will be necessary to balance public
containment and
resources available for health care, and publicly funded and subsidized health services.
economic self-discipline
(For related arguments, please see "Independent National Commission")
by changing provider
and consumer
incentives. These
changes would be
achieved by
restructuring the
delivery system and by
paying networks of
providers a fixed fee per
enrollee, known as
"capitated" payment.
HOSPITAL TAX-EXEMPT STATUS
AHA POSITION
BACKGROUND
Tax exemption for
With President Clinton's proposal to provide universal health insurance coverage has come a
community hospitals
call to reassess the standards for hospital tax exemption. Some have questioned the need for
demonstrates society's
a tax subsidy in the form of exemption when the need to provide charity care is greatly
diminished. President Clinton's health reform proposal (Mitchell-S.1757; Gephardt-H.R.3600)
commitment to
rightly preserves a broad community benefit standard for measuring hospital behavior in meriting
providing everyone
tax exemption.
access to health
Tax exemption for hospitals is based on more than providing free care. Tax-exempt hospitals
services, and aligns tax
provide important benefits to their communities beyond the basic provision of acute care
policy with the larger
services. Today, a hospital is often the hub of a host of programs and services that reach out into
goals of society.
the community: a home health agency; a long-term care facility; drug and alcohol treatment
programs; adult day care for the elderly; outpatient and primary care centers, to name just a few.
And many hospitals are also tackling the tough societal problems that contribute to illness and
injury, from providing improved housing to helping stimulate local economic development.
Proponents of changing this broader community benefit standard, such as California Democratic
Rep. Fortney "Pete" Stark in his proposal (H.R.200), say the standard should be replaced by a
strict charity care standard. Exemption would then hinge on providing a minimum amount of
free care to the uninsured. If charity care is no longer needed under a reformed health care
system, goes the argument, then hospital tax exemption is no longer warranted.
The universal coverage and access to health care we seek under reform, however, is not an
ironclad assurance that services will be available when and where needed, or that all who need
health services will be reached. Hospitals are likely to remain a health care safety net.
And hospitals' health education and outreach efforts are going to be even more important
under reform.
In fact, the President's reform plan proposes a new statutory requirement that charitable health
care organizations assess the health care needs of their community and develop plans to meet
those needs. This change is consistent with AHA's vision of a reformed health care system and
hospitals' role in that system.
Tax-exempt hospitals and other charitable health organizations are the core of our health care
delivery system. Continuation of tax exemption for these institutions and organizations, based
on the current community benefit standard, is consistent with, and complementary to,
guaranteeing broader access to health care coverage.
RECOMMENDATION
The existing community benefit standard for tax-exempt status should be preserved. AHA will
continue to work with Members of Congress to explain the advantages to communities of the
present system.
INDEPENDENT NATIONAL COMMISSION
AHA POSITION
BACKGROUND
An independent
In our current health care system, there is no mechanism to balance public program benefits
national commission
with available federal financing. Rather, these difficult policy decisions are made as part of the
should be established as
political horse-trading that Congress engages in when developing the federal budget. Putting
these difficult decisions in the hands of an independent national commission would have the
part of a reformed
dual benefit of removing them from the political and budgetary process - which too often
health care system to
bears no relationship to actual patient needs - and giving the public a more direct voice in
the process.
determine, with the
help of on-going public
We need to remember that reforming our health care system, one-seventh of our economy, is a
debate, the proper
massive job. It is not going to get done all at once, nor is it going to be perfect from the
balance between
beginning. It will need careful adjustment and course correction along the way. A truly
independent commission can do the best job of managing the on-going balancing act between
promised health care
promised benefits and realistic financing that is going to be such a necessary part of reform.
benefits and funds
While the Administration's plan (Mitchell-S.1757; Gephardt-H.R.3600) does call for the
available to pay for
establishment of a "National Health Board," it is not an independent entity, but merely an arm
those benefits.
of the Executive Branch with "steering committee" status. We are disappointed that it is not
given the responsibility to balance promised benefits with available resources. And, we oppose
the broad range of implementation and regulatory functions it has been given.
RECOMMENDATION
An independent national commission should be divorced from political pressures generated by
the deficit reduction process. It could be modeled on existing successful independent
government bodies such as the Defense Base Closure and Realignment Commission, the Federal
Reserve Board, or the Securities and Exchange Commission. While these model entities have
different purposes and structures, they share the important quality of being insulated from deficit
reduction pressures. Like them, an independent health reform commission should be made up of
a relatively small number of individuals selected on the basis of their knowledge and integrity.
They should be appointed by the President subject to U.S. Senate consent, and should serve for
relatively long terms of roughly seven to ten years.
The independent commission should be focused on a few key roles. First, it should provide advice
to Congress, giving Members the information needed to set an appropriate budget target for
publicly subsidized health care expenditures. In doing so, the commission would ensure that
adequate resources are available to provide a promised set of benefits. The information provided
to Congress might include such factors as the estimated costs of various benefit levels, the
adequacy of public program funding, and the adequacy of provider payments. Establishment of
an independent commission also allows for the flexibility necessary to respond to changing
health spending needs - an example is the unforeseen strain on current resources resulting from
the AIDS epidemic.
While some observers question whether giving these roles to the commission is constitutional -
taxing and spending authority is reserved to Congress by the Constitution - the question
can be addressed by requiring that Congress approve the recommendations of the commission
by an up or down vote. This is the mechanism successfully used by the (military) Base
Closure Commission.
Continued on reverse side.
INDEPENDENT NATIONAL COMMISSION
Finally, once Congress determines the aggregate funding level for publicly subsidized health
care expenditures, the independent commission should determine the basic set of benefits to be
covered under public programs, ensuring that benefits are adequately financed. This set of
benefits should also serve as the benefit floor for coverage offered in the private sector.
The independent commission should not be given a broad range of regulatory functions such as
setting standards for health plan grievance procedures and operating quality management
systems, as are proposed in the Administration's plan. These functions are better left within the
Department of Health and Human Services. The role of the independent commission should be
narrowly defined, to free it to concentrate on the difficult choices that need to be made in
balancing benefits against financing and on gathering public input into the process.
In summary, the viability of a network delivery system - which we believe must be the
fundamental building block of reform - depends on the adequacy of the basic benefit package
and on the adequacy and fairness of funding. It is important to create an independent
commission to safeguard the integrity of the decision-making process that will define that
critical balance.
(For related arguments, please see "Global Spending Caps")
MEDICARE INTEGRATION
AHA POSITION
BACKGROUND
AHA envisions
Currently, the health care system is a tangle of conflicting incentives, both for patients and
reforming the health
health care providers.
care system by
Patients who have health care coverage through traditional fee-for-service medicine - in which
changing the way in
providers are paid for each episode of care - have no real incentives to seek the most cost-
which care is delivered.
effective care. And the differing incentives for hospitals and physicians also do not provide the
strongest incentives for provider cost-effectiveness. Providers in a reformed health care system
Community care
who form collaborative groups, provide integrated care, and are paid a fixed, up-front fee for each
networks" - -
enrolled patient do have much stronger incentives to provide cost-effective care, including
cooperating groups of
emphasizing preventive services and health promotion. Patients in a reformed system will have
local health care
the ability to make informed choices among plans, based on reports to the public on quality and
cost-effectiveness.
providers - would
integrate their services
Keeping Medicare beneficiaries (who account for an average 40 percent of hospital revenues) in
traditional fee-for-service arrangements undermines the movement to a reformed health care
to provide more cost-
system. Those hospitals who treat a disproportionate share of Medicare patients will see the
effective care. In order
effects of this double standard magnified. They will be disadvantaged in their efforts to become
to achieve maximum
part of integrated care networks, whether that be in taking a leadership role to form a network, or
savings and
assuming a role as a vendor of services to a network. Given Medicare's historic underpayment
record, exacerbated by the proposed reductions in the Administration's and other reform plans,
efficiencies, it is
these facilities will be financially unattractive to potential network partners. They simply won't
essential that the
have the resources to do the reconfiguring and outreach that will be necessary as we move from
today's flawed system to tomorrow's better one.
growing Medicare
population be part of
Our goal is to move Medicare beneficiaries into integrated delivery systems. And, we have
the same reformed
identified a number of options that could increase enrollment in existing Medicare managed care
system as other
arrangements. We see providing incentives for Medicare beneficiaries to choose managed care
arrangements as a stepping stone to the restructuring of the health care delivery system into
Americans.
"health plans," as they're known in the Administration's plan (Mitchell-S.1757; Gephardt-
H.R.3600), or the community care networks in our plan.
These options include: Make managed care arrangements less expensive than a fee-for-service
option by waiving a current cost paid by Medicare beneficiaries - for example, deductibles,
copayments, or a limit on inpatient days; offer benefits in a managed care arrangement that are
currently excluded from Medicare coverage - such as prescription drugs, long-term care, or more
preventive services; offer a point-of-service option in Medicare managed-care arrangements.
Today, providers who treat Medicare patients can be paid either on a fee-for-service or a
capitated basis. This option would allow an enrollee to "opt out" of the capitated payment
arrangement at any time to see a provider of his or her choice - but at a higher cost to the
beneficiary. This opens to Medicare beneficiaries the same care and payment options currently
available to other Americans.
Any of these options must be linked to a vigorous effort to educate older Americans about the
advantages of these plans and the satisfaction of those who use them. And, of course, such
managed care plans must not sacrifice quality in delivering care at a lower price.
Continued on reverse side.
MEDICARE INTEGRATION
RECOMMENDATIONS
Restructuring the health care system for only part of the population - as would be the case
if Medicare beneficiaries are not included in reform - undercuts efforts to achieve more cost-
effective and efficient delivery of services. Medicare beneficiaries can be brought into a reformed
system through these steps:
Encourage the formation of community care networks.
Educate Medicare beneficiaries about the benefits of these networks.
Encourage Medicare beneficiaries, through incentives, to choose these plans, with existing
managed care plans as a transitional step.
Community Care Network, Inc.
uses the name Community Care
Network as its service mark and
reserves all rights.
MEDICARE FINANCING
AHA POSITION
BACKGROUND
We agree that the
As the Administration and lawmakers look for ways to finance an overhaul of the health care
growth in health care
system, the Medicare program appears to be the cookie jar into which everyone wants to get
their hands.
spending must be
moderated. The way
The President's reform plan (Mitchell-S.1757; Gephardt-H.R.3600) would reduce Medicare
to achieve that end is to
spending $124 billion by the year 2000. Of the reductions in provider payments, 70 percent
would come as a result of lower payments to hospitals. The other plans in the political center,
fundamentally
namely the Chafee/Dole and Cooper/Grandy proposals, also call for large reductions in Medicare
restructure our health
spending as a means of financing their reform efforts.
care system, through
Under the President's reform plan, $74 billion of the $124 billion in Medicare spending
establishing cooperating
reductions would come through lower payments to hospitals. These reductions come on top of
groups of health care
Medicare reductions sustained by hospitals last summer as part of OBRA 1993. Of the $56
providers to eliminate
billion in five-year Medicare reductions contained in OBRA 1993, $24 billion came from
hospital care for the elderly. And these reductions are added to the $43 billion approved as part
expensive duplication
of the 1990 budget agreement.
of services and
technology and
While we support the added benefits for Medicare patients that the reductions the
Administration proposes will help fund - prescription drugs and long-term care - we cannot
stimulate both
support underpaying hospitals in order to pay for these benefits.
effectiveness and
efficiency. Significant
Such unprecedented reductions would be unwise policy at any time, but would be especially
dangerous as we attempt to reform our health care delivery system. Providing universal coverage
reductions in Medicare
is not cost-free. Expanding the covered population, restructuring the health care system,
spending undermine
reconfiguring hospitals and other services for the future, and investing in new technologies to
our ability to transform
meet the demands of the new system - all will need adequate resources. Infrastructure
investments we all endorse, such as new information systems, electronic billing, and
the health care delivery
computerized patient records, will require an up-front investment. Unless we invest adequate
system and threaten
resources now, the benefits of improved efficiencies will never materialize.
our ability to continue
The reductions called for by the President are intended to limit the annual growth in Medicare
to deliver quality
spending to no more than the rate of general inflation, bringing the current annual growth rate of
patient care, not just to
about 12 percent down to just over 4 percent by the year 2000. While we agree with the nation's
Medicare patients, but
need to slow health spending growth, we believe the ability of hospitals to continue to provide
high quality, cutting-edge health care services would be seriously threatened by these massive
to all patients.
reductions. In 1991, according to the Prospective Payment Assessment Commission (ProPAC),
Medicare payments fell 12 percent short of meeting hospitals' costs for those patients. That is
why two-thirds of the nation's hospitals must subsidize the cost of treating Medicare patients in
fiscal year 1993.
The President argues that greater efficiencies can be achieved in hospital and physician settings.
While it may be true that some efficiencies can be achieved, the Administration and Congress
must be realistic in establishing their savings goal. Hospitals have and will continue to search for
ways to improve efficiency. But ProPAC also reports that 60 percent of hospital cost increases
from 1985 to 1989 were due to factors beyond hospitals' control, including inflation in the
general economy and the increasing intensity and complexity of patient's health needs.
Continued on reverse side.
MEDICARE FINANCING
RECOMMENDATIONS
Use the estimated $58 billion in savings and taxes now targeted for deficit reduction to
help finance the health care reform effort.
Increase taxes on alcohol, tobacco, and ammunition and devote the additional revenue to
health care.
Limit the employer/employee tax deductibility for health care coverage.
Means-test the Administration's planned new entitlement subsidies for many individuals and
small businesses that may be able to afford coverage on their own, including the proposed
subsidy to early retirees.
Postpone expanding Medicare benefits (for example, the Administration's proposal to add
outpatient prescription drugs and more home care) until universal access is achieved for the
non-Medicare population.
Ask upper-income Medicare beneficiaries to contribute toward the cost of Medicare Part A
coverage through premiums and to pay a larger portion than they do now of Part B coverage
through premiums.
Reform the way patients receive care by restructuring the health care delivery system to
stimulate both effectiveness and efficiency.
UNIVERSAL ACCESS
AHA POSITION
BACKGROUND
Access to health
There are currently 38.9 million uninsured individuals in the United States, 10 million of whom
coverage for all
are children. Half of the uninsured live in families with incomes below the poverty threshold.
Americans - -
Medicaid, a program originally designed to provide health insurance for the poor, now provides
care for only about half of those living in poverty. Because of strained federal and state finances,
"universal access" -
those who do qualify for Medicaid face limitations on the services they receive. Even for the
is AHA's first priority
privately insured, coverage limitations are more commonplace today as many employers and
in the health care
insurers resort to benefit cutbacks to limit their rising costs. On the positive side, the current
system of employer-based health coverage does provide coverage for 88 percent of the nonelderly,
reform debate. Access
privately insured population and more than 85 percent of the uninsured are connected to the
to such care should be
workplace- either as workers or living in a family headed by a worker. While the uninsured
achieved within a
ultimately have access to care through hospital emergency rooms, it is often care received after
an illness has become acute, and certainly not in the most cost-effective setting.
reasonable period of
time and provided
The three major health care reform proposals Clinton Administration (Mitchell-S.1757;
Gephardt-H.R.3600), Senate Republican Leadership (Chafee/Dole, S.1770) and that of
through a pluralistic
Tennessee Democrat Jim Cooper and lowa Republican Fred Grandy (Cooper/Grandy, H.R.
system of financing
3222) approach the question of universal access differently.
that combines private
The Clinton Administration's proposal, set out in "Health Security Act" legislation - achieves
coverage with a new
universal access on a relatively fast track. States enter the reformed health system on the basis of
public program.
an approved state plan that ensures universal access for all citizens and legal aliens. States are
Funding mechanisms
required to have an approved plan by January, 1998. While emergency services are funded for
undergirding universal
undocumented aliens, these persons are specifically excluded from eligibility for the guaranteed
national benefit package. Universal access is financed by requiring employers to provide
access must provide
coverage (known as an "employer mandate"). For the unemployed, subsidies are provided based
adequate and fair
on an income-related means test. Additional subsidies are available to small businesses and to
financing to providers.
those employing low-wage workers. The current acute-care Medicaid program would be absorbed
into the reformed system.
The Senate Republican Leadership (Chafee-Dole) proposal, "Health Equity and Access Reform
Today Act of 1993," approaches universal access more slowly through an individual mandate as
opposed to an employer mandate. Low-income individuals would purchase coverage through a
means-tested federal voucher program. The voucher program would be financed through
reductions in the rate of growth in federal entitlement programs and would be phased in by 2005.
The Medicare and Medicaid programs would continue to serve their present populations. All
individuals would be required to pay for their own health care coverage by the year 2005, with
the federal tax system as the enforcement mechanism.
A proposal by Congressman Jim Cooper (D-TN), "The Managed Competition Act of 1993,"
does not propose a mandate either employer or individual; it rather purports to expand access
through a voluntary system that does not require individuals to have, or employers to pay for,
coverage. The proposal folds in the current Medicaid program for acute-care services into a new
public program and uses the subsequent savings to finance it. The new public program pays for
health premiums for those below 100% of the poverty threshold. For those between 100% and
200%, premiums would be subsidized on a sliding scale.
Continued on reverse side.
UNIVERSAL ACCESS
RECOMMENDATIONS
Guaranteed universal access remains AHA's first priority in health care reform. It should be
achieved within a reasonable period of time and through a pluralistic financing system. That
pluralistic financing system should have as its base an employer mandate. An employer mandate
is the most effective and practical road to universal access. It builds on the strength of current
employer, employee, and insurer relations, and preserves these local ties. It is the strongest
building block for universal access because it already provides health coverage for nearly 90
percent of the nonelderly, privately insured population.
Universal access can only be achieved by financially assisting citizens, particularly low-income
citizens, to obtain health coverage. These subsidies involve some combination of employer-plus-
government contributions. The Clinton Administration's proposal maximizes employer
contributions via the mandate; the Chafee-Dole and Cooper proposals require larger individual
and government contributions to achieve universal access.
AHA is concerned that without an employer mandate, subsidies would require large additional
federal expenditures that may not be politically feasible - hence universal access may not be
achievable using this route.
MEDICAL LIABILITY REFORM
AHA POSITION
BACKGROUND
The current medical
AHA, along with other health care groups, has long advocated reform of the medical liability
liability system costs too
system. Traditionally a state issue, a growing movement for reform at the federal level has
developed in recent years. The national health care reform debate has brought a renewed
much and works too
interest in the issue.
slowly. It fails to
provide access to the
Various legislative proposals to reform the medical liability system have been introduced in
the past year. Elements of these proposals have been incorporated into comprehensive health
legal system or fair
care reform plans. The Administration's plan includes some medical liability reforms:
compensation for many
alternative dispute resolution for health plans; limits on attorneys' fees to 1/3 of awards; periodic
injured patients, while
payments and modification of the collateral source rule; and pilot programs based on practice
guidelines. In addition, the Administration's plan would establish demonstration projects to test
providing exorbitant
the notion of "enterprise liability," under which health plans would carry liability risk rather than
awards to others. It
individual providers.
adds billions of dollars
Both H.R. 3222 introduced by Representatives Jim Cooper (D-TN) and Fred Grandy (R-IA)
to the national health
and S. 1770 introduced by Senator John Chafee (D-RI), major health care reform proposals
care bill by encouraging
before Congress, include significant medical liability reform measures. Provisions include:
physicians to practice
alternative dispute resolution; a $250,000 cap on noneconomic damages; elimination of joint and
several liability for noneconomic damages; periodic payments; limits on statutes of limitations;
"defensive medicine"
and use of practice guidelines. The Cooper/Grandy bill also limits attorneys' contingency fees on
as a hedge against
a sliding scale.
potential claims and
lawsuits. The
cumulative effect
RECOMMENDATION
threatens access to
health care, especially
AHA recommends that medical liability reform be included in any health care reform proposal.
The provisions supported by the National Medical Liability Reform Coalition (NMLRC), of
in certain high-risk
which AHA is a member, will make positive contributions to our overall goal of health care
services.
reform. These include:
Patient Safety Reform
The AHA believes that
comprehensive health
Alternative Dispute Resolution (federal support for state demonstration projects)
care reform must
Practice Parameters/Guidelines (federal support for state demonstration projects)
include effective
medical liability reform.
Uniform Standards for Medical Liability Claims, including:
Such liability system
- Periodic Payment
- Cap on Noneconomic Damages
reform is an essential
- Mandatory Offsets for Collateral Sources
component of achieving
- Attorneys' Fees Limited by Sliding Scale
-
Proportionate Liability (Elimination of Joint and Several Rule)
access to care,
-
Limits on Statutes of Limitations and other provisions
containing costs, and
ensuring quality of care
Federal preemption of state law, unless the corresponding state laws are more effective.
- fundamental
objectives of compre-
Medical liability reform is an essential component of comprehensive health system reform. AHA
hensive health reform.
will continue to participate in the National Medical Liability Reform Coalition, a broad-based
group of organizations promoting medical liability reform as a key element of health care reform.
In addition to the
MEDICARE AND MEDICAID UPDATE
proposed changes to the
Medicare and Medicaid
PPS WAGE INDEX
programs included as
Both the Prospective Payment Assessment Commission (ProPAC) and the Health Care
part of the Clinton
Financing Administration (HCFA) are working to develop alternative labor market area
health reform plan,
definitions for Medicare's inpatient prospective payment system (PPS). Currently, HCFA uses
AHA believes the
Metropolitan Statistical Area (MSA) definitions developed by the Office of Management and
Clinton Administration
Budget to determine hospital labor market areas. HCFA determines a separate wage index value
for hospitals in each MSA and, for each state, a statewide rural wage index for all hospitals
may propose several
outside MSAs.
changes to the
AHA has opposed the use of MSAs to define hospital labor market areas since the inception of
Medicare and Medicaid
the PPS. Using MSAs often results in neighboring hospitals being assigned substantially
programs during 1994
different wage index values by HCFA and, subsequently, receiving vastly different payment
that have important
amounts from Medicare simply because those hospitals are on different sides of an MSA
boundary. At the same time, it also leads to HCFA assigning the same wage index value to
implications for
hospitals within an MSA or rural area even though those hospitals may have very different wage
hospitals. These
levels.
potential changes may
The alternative labor market area definitions under consideration by ProPAC and HCFA are
affect Medicare
designed to smooth out differences in wage index values between neighboring hospitals and to
payment to hospitals for
ensure that the wage index more accurately reflects wage levels within areas. However, any
both inpatient and
change in hospital labor market areas is likely to significantly redistribute Medicare payments
among hospitals.
outpatient services, as
well as Medicaid
AHA staff have met with both HCFA and ProPAC to discuss alternative labor market area
disproportionate share
definitions, but AHA has not endorsed any of the alternatives under consideration. Consistent
with the PPS equity policy adopted by the AHA Board of Trustees in 1992, AHA will
hospital (DSH)
recommend that HCFA phase in any change in labor market area definitions that leads to a
payments and the
significant redistribution of Medicare payments to hospitals.
ability of states to
receive Medicaid
waivers that are
OUTPATIENT PPS
necessary to implement
AHA expects that sometime in 1994 the Secretary of Health and Human Services will submit a
managed care
long-overdue report to Congress on a new Medicare prospective payment system for hospital
programs.-
outpatient services. Currently, Medicare uses a number of different methodologies to pay
hospitals for outpatient services, including reasonable cost, fee schedules, and blended payment
amounts.
Throughout 1994,
AHA stuff will
Based on the latest information available to AHA, we believe the Secretary will recommend that
continue to work with
Congress immediately implement a fully prospective payment system for ambulatory surgery and
radiology services provided in the hospital outpatient setting and move to prospective payment
the Administration and
for other outpatient services at some later date. Payment amounts under the PPS for ambulatory
Congress on these and
surgery and radiology services would be based on a blend of average hospital costs for those
any other proposed
services and freestanding ambulatory surgery center payment rates or radiology fee schedule
amounts.
changes to the
Medicare and Medicaid
The current mix of Medicare payment methodologies for hospitals' outpatient services imposes a
programs and
substantial administrative and paperwork burden on hospitals. Consequently, AHA supports the
implementation of a prospective procedure-based fee schedule based on hospital costs for
periodically update you
Medicare outpatient services. Until such a procedure-based system can be implemented, AHA
as important
supports a reasonable cost limit system of payment for Medicare outpatient services.
developments occur.
Continued on reverse side.
MEDICAID DSH PAYMENTS
The Omnibus Budget Reconciliation Act of 1993 contained a provision that limited the
Medicaid DSH program in two ways. First, states will be prohibited from designating hospitals
with less than a one percent Medicaid inpatient utilization rate as DSH hospitals. Second, the
amount of DSH payment adjustments a state may pay to an individual hospital will be limited to
no more than that hospital's Medicaid payment shortfall plus uncompensated care costs.
(Medicaid payment shortfall is defined as the difference between the cost of care provided
Medicaid recipients and the Medicaid non-DSH payments. Uncompensated care is defined as the
difference between the cost of providing care to individuals with no health insurance and out-of-
pocket payments and other third-party payments exclusive of state and local indigent care
payments.) The facility-specific cap is phased in beginning with public hospitals in state fiscal
year 1995. The cap for private hospitals would begin in the subsequent state fiscal year. The
Secretary of HHS has some discretion in defining costs for purposes of implementing the facility-
specific cap.
HCFA intends to publish implementing rules prior to July 1994. AHA staff have met with
HCFA to discuss how hospital inpatient and outpatient Medicaid and uncompensated care costs
should be defined. These discussions with HCFA staff will be ongoing and will include AHA's
partners in the Medicaid hospital coalition (the Association of American Medical Colleges, the
National Association of Public Hospitals, and the National Association of Children's Hospitals
and Related Institutions).
MEDICAID WAIVERS
The Social Security Act grants the Secretary of HHS authority to waive statutory requirements
for Medicaid to conduct demonstration projects. Section 1115 of the Social Security Act allows
waiver of any provision of the Medicaid program for research and demonstration purposes.
Section 1915 of the Act permits states to waive certain Medicaid provisions to allow states to
develop cost-effective alternative methods of delivery and reimbursement. In recent years states
have pursued statewide health care reform initiatives by seeking section 1115 waivers and have
pursued Medicaid managed care programs through section 1915 waivers. Last year the National
Governors' Association and HCFA negotiated a streamlined waiver process to make it easier for
states to apply for these waivers. AHA has told HCFA that we believe any waiver process should
include provider and beneficiary input. As the states' role in health care reform increases, a
waiver process involving providers and beneficiaries becomes even more important. AHA will
continue to work with its Medicaid hospital coalition partners and HCFA staff on an improved
waiver process.
ed/
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accepted beeplens hiehed to states.
it roated in
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medicare integration - provide
to never into new plan. and
(only incentines ger new beas if it stags 7 medican)
if high medicare peovider + in get a
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1994 AHA Annual Membership Meeting
Confirmed speakers (as of 1/14/94)
Monday, January 31
Small or Rural Breakfast (7:00-8:15 a.m.) --Rep. Steve Gunderson (R-WI)
Metropolitan Hospitals Breakfast (7:00-8:15 a.m.) - Rep. Ron Wyden (D-OR)
Federal Relations Symposium (8:30 a.m.-3 p.m.)
9:45-10:45 a.m.
Congressional Crossfire
moderator: ABC News correspondent Cokie
Roberts
panelists: Sen. John Breaux (D-LA), Sen.
John Chafee (R-RI) and Rep. Jim
McDermott (D-WA)
1:00 p.m.-1:45 p.m.
John Chancellor, former NBC News commentator
2:00 p.m.-2:30 p.m. HCFA Administrator Bruce Vladeck
2:30 p.m.-3:00 p.m. Sen. Ted Kennedy (D-MA)
Tuesday, February 1
Hospital Trustee Breakfast (7:00-8:30 a.m.) - -William Archey, U.S. Chamber of
Commerce
Wednesday, February 2
From the Nation to the Neighborhood: Turning Ideas Into Action
(9:00-11:00 a.m.)
Ira Magaziner, White House senior adviser for policy
single
development
in
dei guice
71
Panelists:
Paul Offner, Senate Finance
David Abernethy, House Ways
Y
alledve
and Means Committee's health
panel
strachere
Sheila Burke, chief of
staff, office of Senate
Republican Leader Bob Dole
5)
-
(boza to budgel res.) - legitemate D54 issue on
6
target n Soal, not formal with
global badgel
Reform Chart ! 1/6/94 12:43 PM Page 4
ACCESS AND COVERAGE FOR ALL
PRINCIPLES/GOALS
McDermott/
Stark
Mitchell/Gephardt
Chafee/Dole
Cooper/Grandy
Michel
Nickles
Wellstone
(Clinton)
H.R.1200/S. 491
H.R.200
S.1757/H.R.3600
S.1770
H.R.3222
H.R.3080
S. 1743
EVERYONE COVERED
Yes, by 1995 for
No. Coverage not
Yes, by 1998, except
Yes, for full-time
No. Employers
No. Employers
No.
BY FIXED DATE
citizens and legal
required.
undocumented
workers but not
must offer, not pay
must offer, not pay
aliens; others at
aliens.
until 2005.
for coverage.
for coverage.
national health
board or state
discretion.
SUBSIDIES FOR
Yes. Tax-based
Limited. Medicaid
Limited, for those
Limited. For those
Limited. For those
Limited. For those
Limited. Tax
LOW-INCOME
financing for all.
expanded to those
below 150% of
below 240% of
below 200% of
below 200% of
credit varies with
below 200% of
poverty and $40,000
poverty. Funding
poverty. Funding
poverty.
income.
poverty.
income. Subsidy
depends on savings
depends on savings
dollars are capped.
achieved.
achieved.
INSURANCE
Not applicable.
Yes. Prohibits
Yes. Prohibits
Yes. Prohibits
Yes. Prohibits
Yes. Prohibits
Limited. Pre-
UNDERWRITING
Private insurance
discriminatory
discriminatory
discriminatory
discriminatory
discriminatory
existing conditions
REFORMS
eliminated for
practices.
practices.
practices.
practices.
practices, but only
eliminated and
covered services.
for employer-based
guaranteed issuance
plans.
for qualified health
insurance plan.
INSURANCE MARKET
Not applicable.
Yes.
Yes. Mandatory
Yes. Voluntary
Yes. Mandatory
Yes. Guarantees
No.
RESTRUCTURING
Creates voluntary
health alliances
purchasing
health plan
access for small
purchasing
formed to facilitate
cooperatives to
purchasing
groups and creates
cooperatives to
the purchase of
facilitate the
cooperatives for
state and multi-
facilitate the
private insurance
purchase of
employers of less
employer risk pools.
purchase of
and Medicaid.
insurance.
than 100.
insurance.
UNIFORM BASIC
Yes.
No.
Yes.
Yes, both standard
Yes. Coverage
No.
Yes, but qualified
BENEFIT PACKAGE
and catastrophic.
details to be set by
health plans
Coverage details to
National Board.
required to cover
be set by Benefits
acute care medical
Commission.
services only.
BROAD CONTINUUM
Yes.
Not applicable.
Yes, but mental
Not clear.
Not clear.
No.
No. Preventive
OF CARE IN BASIC
health and long-
care for low-income
BENEFIT PACKAGE
term care limited.
grant program.
Long-term care
through Medical
Savings Account.
Reform Chart
!
1/6/94 12:24 PM
Page
5
DELIVERY SYSTEM RESTRUCTURING
PRINCIPLES/GOALS
McDermott/
Stark
Mitchell/Gephardt
Chafee/Dole
Cooper/Grandy
Michel
Nickles
Wellstone
(Clinton)
H.R.1200/S.491
H.R.200
S.1757/H.R.3600
S.1770
H.R.3222
H.R.3080
S.1743
ENCOURAGES
Permits community
No. Incentives to
No, but does
No, but qualified
No, but
No, but does not
No, but does not
COMMUNITY-BASED,
health service
form group- and
provide incentives
plans could
accountable health
preclude them.
preclude them.
PUBLICLY
organizations but
staff-model HMOs
for integrated
accommodate
plan could
ACCOUNTABLE
no incentives to
only.
delivery.
networks.
accommodate
PLANS
choose them.
networks.
ENCOURAGES
No. Uses global
No. Uses Medicare
Yes. Promotes
Yes. Promotes
Yes. Promotes
Yes. Promotes
No.
ECONOMIC SELF-
budgets and fee
payment
managed care
managed care
managed care
managed care
DISCIPLINE
schedules to limit
methodologies and
through risk
through risk
through risk
through risk
THROUGH
spending.
global budget to
bearing health
bearing health
bearing health
bearing health
CAPITATION
limit spending.
plans.
plans.
plans.
plans.
REMOVES
No.
No.
Limited. Initial
Yes. Provides
Limited. Provides
Limited. Ease anti-
Limited.
ANTITRUST AND
steps taken by
exemption from
antitrust guidelines
trust but not other
Guidelines for joint
OTHER BARRIERS TO
agency guidelines.
antitrust laws for
to facilitate plan
barriers.
venture antitrust
PROVIDER
Does preempt
certain activities
development. Also
exemption.
COLLABORATION
certain state laws
and preempts
preempts certain
Preempts state laws:
AND NETWORK
that would restrict
certain state laws
state laws that
mandated benefits,
FORMATION
networks.
that would restrict
would restrict
anti-managed care,
networks.
networks.
and mandated cost-
sharing.
CONSISTENT
Yes.
No. Incentives
No, but state
No. Medicare
No. Medicare
No.
No. Study to assess
INCENTIVES FOR
under Medicare
option to enroll
remains unchanged
remains unchanged.
Medicare voucher
MEDICARE
unchanged.
Medicare
but Congress to
program.
beneficiaries
study possible
through alliances.
phase-in to
purchasing
cooperatives.
FAVOR MEDICAL
No.
No. Asks for study
Limited. Does not
Yes.
Yes.
Yes.
Limited. Limits
LIABILITY REFORM
on tort reforms and
include key reforms
noneconomic
use of alternative
such as limiting
damages and calls
dispute resolution
non-economic
for alternative
mechanisms.
awards.
dispute resolution
process.
Reform Chart ! 1/6/94 12:43 PM Page 6
FAIR FINANCING
McDermott/
Stark
Mitchell/Gephardt
Chafee/Dole
Cooper/Grandy
Michel
Nickles
Wellstone
(Clinton)
H.R.1200/S.491
H.R.200
S.1757/H.R.3600
S.1770
H.R.3222
H.R.3080
S.1743
MAINTAIN MIX OF
No. Government
Yes.
Yes.
Yes.
Yes.
Yes.
Yes.
PUBLIC AND PRIVATE
is single source of
FINANCING
financing and
payment.
BROAD-BASED
Yes. Funded by
Same as today.
Yes, but much of
Same as today.
Same as today.
Same as today.
No. Medicare cuts
SOURCE OF
payroll, income,
Source of funds for
new costs funded by
Costs funded by
New costs funded
New costs covered
of $67 billion and
FINANCING
and other taxes.
added benefits not
Medicare and
large Medicare and
from limiting
by $17 billion in
Medicaid cuts of
specified.
Medicaid cuts
Medicaid
employer
reduced Medicare
$72 billion over
($189 billion).
reductions.
deductibility of
Part B subsidies for
five years to offset
plan costs and $44
upper income
tax credit revenue
billion from
beneficiaries and
loss.
Medicare cuts.
changed federal
retirement rules.
MECHANISM TO
No.
No.
No.
Yes. Independent
No.
No.
No.
PUBLICLY BALANCE
Benefits
BENEFITS WITH
Commission to
T
FINANCING
publicly reconcile
benefits provided
with available
funding.
EXCLUDES FIXED,
No. Uses formula-
No. Relies on
No. Includes
Yes.
Yes.
Yes.
Yes.
FORMULA-BASED
driven global
formula-driven
national spending
SPENDING LIMITS
budgets.
global budgets for
limit tied to CPI.
all services and by
all payers.
ACTUARIALLY
No.
No.
Unlikely. Not for
Likely.
Likely.
Same as today.
No.
SOUND PREMIUM
Medicare and
Medicaid. Overall
bases for various
limits are unrelated
to need/demand.
INDIVIDUALS BEAR
Not applicable.
Yes, depending on
Yes, but tax subsidy
Yes. Tax
Yes. Tax
Yes, depending on
Yes, beyond level
ECONOMIC IMPACT
No plan choice.
employer
structure remains
deductibility
deductibility
employer
of tax credit.
OF PLAN CHOICE
contribution.
unchanged until
limited.
limited.
contribution. Tax
2003.
subsidy structure
remains unlimited.
Reform Chart
!
1/6/94 12:25 PM
Page
7
BUILDING BLOCKS/STUMBLING BLOCKS
McDermott/
Stark
Mitchell/Gephardt
Chafee/Dole
Cooper/Grandy
Michel
Nickles
Wellstone
(Clinton)
H.R.1200/S.491
H.R.200
S.1757/H.R.3600
S.1770
H.R.3222
H.R.3080
S.1743
BUILDING BLOCKS
+
Achieves
+
Requires
+
Significant
+
Definition of
Definition of
+
Insurance
+
Removes barriers
universal access.
community rating
progress on
qualified health
accountable health
reforms.
to provider
and guarantees
universal access.
plans could
plans could
collaboration and
+
Uniform benefit
renewability of
accommodate
accommodate
+
Malpractice
network formation.
package.
coverage.
+
Incentives for
networks.
networks.
reforms.
development of
+
Provides for
integrated delivery
+
Independent
+
Pluralistic
Antitrust relief.
malpractice liability
systems.
commission would
financing.
reform.
balance benefits
and financing.
+
Uniform benefit
package.
+
Removes many
barriers to network
+
No formula-
formation.
driven global
budget.
STUMBLING BLOCKS
Single-payer
Uses formula-
Formulistic
Universal access
No universal
No universal
No universal
system using
driven global
approach to setting
achieved too slowly
access or coverage.
coverage.
access or coverage.
formula-driven
budgets and
annual spending
and excludes part-
global budgets.
Medicare rate-
limits.
time workers.
Significant short-
Preserves the
No delivery
setting for all.
term Medicare cuts.
fragmented delivery
system
Preserves the
Significant cuts
Would cut
system and all
restructuring.
fragmented care
Preserves the
in Medicare and
Medicare and
Medicare not
current incentives.
delivery system.
fragmented care
Medicaid.
Medicaid.
under similar
Significant
delivery system.
reformed
Medicare and
Arbitrary subsidy
incentives.
Medicaid cuts.
cap jeopardizes
universal access.
No consistent
No Medicare
source of funds for
reform.
Medicare left out
low-income
of delivery reform.
subsidies.
American Hospital Association
AHA
Capitol Place, Building #3
50 F Street, N.W.
Suite 1100
Washington, D.C. 20001
Telephone 202.638-1100
FAX NO. 202.626-2345
Statement
of the
American Hospital Association
before the
Senate Finance Committee
on
Medicare Spending Reductions
and the
Integration of Medicare into a Reformed Health Care System
April 12, 1994
Mr. Chairman, I am Dick Davidson, president of the American Hospital Association. On
behalf of AHA's 5,000 institutional members, I am pleased to have the opportunity to testify
here today. The issues we are discussing -- the role Medicare will play in financing health
care reform, and whether Medicare beneficiaries will become part of the reformed health
care system -- are absolutely central to the reform debate.
Hospitals strongly disagree with the idea that Medicare reductions are a reasonable way to
finance reform. We don't believe there are resources in the system to allow such large --
truly unprecedented -- reductions without seriously undermining both hospitals' ability to
EMBARGOED UNTIL 10:00AM TUES. APRIL 12 Page 1
carry out the changes that will be needed under reform and hospitals' responsibility to
provide high quality care for Medicare patients, and for all patients. Today, we draw on
new data, which we asked the health consulting firm Lewin-VHI to develop.
HOSPITALS SUPPORT FUNDAMENTAL REFORM
As we begin, however, I want to be very clear about one thing. Hospitals are firm
supporters of fundamental health care reform. I couldn't be prouder of the work our
members have done in developing a progressive, practical vision for reform. Our vision is
centered on three core objectives:
Guaranteed coverage and access to care;
Restructuring the delivery system to deliver more efficient and effective care;
and
fair financing.
We use our three goals as a template, against which we measure all other reform proposals.
No proposal now on the table would achieve all our goals -- so we do not endorse any single
reform plan. We are, however, working to support elements of proposals that do move us
toward our reform vision. And, we are providing constructive suggestions to strengthen
areas we feel fall short. That is the procedure we are following today, explaining to you
why proposed Medicare reductions and the failure to integrate the Medicare population in
reform undermine achieving our fundamental goals.
EMBARGOED UNTIL 10:00AM TUES. APRIL 12 Page 2
Many of the congressional health care reform proposals would make unprecedented cutbacks
in the rate of increase in Medicare spending to pay for reform. The Administration's
proposal would reduce Medicare spending by $118 billion over the next six years in order to
finance health care reform. This is twice the size of any reductions previously taken from
Medicare. Other proposals, including those offered by Rep. Pete Stark (D-CA), Sen. John
Breaux (D-LA)/Rep. Jim Cooper (R-TN), and Sen. John Chafee (R-RI) also would reduce
Medicare spending by significantly more than ever before.
It's important to remember that these proposed reductions come on top of OBRA 1993
legislation, which cut $56 billion from projected Medicare spending; and on top of $43
billion in reductions approved just three years earlier as part of the 1990 budget summit
agreement. Furthermore, outside of the health care reform debate, many members of
Congress favor limiting future spending on entitlement programs, including Medicare and
Medicaid. Others support a requirement to balance the federal budget on an annual basis --
an approach that would hit hard on the largest federal programs, particularly Medicare.
We should also put these reductions in the context of current inadequate Medicare payment
rates. The Prospective Payment Assessment Commission (ProPAC) -- the independent
agency set up by Congress to oversee Medicare -- has concluded that Medicare payments to
hospitals already fail to keep pace with hospitals' costs.
EMBARGOED UNTIL 10:00AM TUES. APRIL 12 Page 3
NEW ESTIMATES ON IMPACT OF REDUCTIONS
The Lewin-VHI estimates give us a preliminary forecast of what could happen in the future
with Medicare reductions of the magnitude envisioned in the Administration's reform
proposal. It is important to note that these estimates do not pretend to predict the future with
any certainty -- they are highly sensitive to underlying assumptions about future growth in
hospital costs. They are, however, illustrative of the kinds of pressures that hospitals face if
Medicare spending reductions alone of this size are enacted. And the magnitude of those
pressures is sobering:
By the year 2000, after six years of spending reductions, Medicare could pay
hospitals only 71 cents for every dollar of inpatient care delivered to a
Medicare patient.
The spending reductions could make the Medicare program an even poorer
payer than today's Medicaid program, which currently pays hospitals about 82
cents on the dollar.
While most hospitals and all states are affected, teaching hospitals, large urban
areas, and communities with hospitals serving a disproportionately large
number of low-income patients would be particularly hard hit.
EMBARGOED UNTIL 10:00AM TUES. APRIL 12 Page 4
The study uses Medicare reductions contained in the Administration's plan because it was the
most detailed available at the time the study began. Among the health care providers and
Medicare beneficiaries who would be affected by the President's spending reductions,
Administration estimates indicate that hospitals are hardest hit, taking $70 billion of the $118
billion in proposed reductions.
The data show that reductions like these, with no accompanying reform steps such as
expanding health care coverage, could cause significant financial losses for hospitals. While
arguably losses might be mitigated by reducing the rate of growth in hospital costs, hospitals'
ability to squeeze down costs is limited. As ProPAC recently reported, 60 percent of
hospitals' cost increases from 1985 to 1989 were due to factors beyond hospitals' control --
inflation in the general economy (39 percent) and increasing complexity of patients treated
(21 percent). Hospitals are deeply concerned that losses of the size estimated by Lewin-VHI
cannot be made up through increased efficiency and will therefore undermine our ability to
deliver high quality care and to participate in health care reform.
One reason for our concern is that the current health care environment, with its growth in
managed care, means that Medicare reductions will be felt by hospitals, patients, and
communities more deeply than ever before. In the past, hospitals have been able to shift
unfunded costs to other non-government payers -- meaning higher costs for these patients and
their employers. Managed care contracts, however, narrow this option. So, too, do the
growing number of private insurers who negotiate discounted prices. And, under many of
EMBARGOED UNTIL 10:00AM TUES. APRIL 12 Page 5
the comprehensive health care reform proposals that seek to limit private sector spending, the
ability to cost-shift is reduced even more.
HOSPITAL CHOICES ARE FEW UNDER MEDICARE REDUCTIONS
This leaves hospitals with unpalatable choices for controlling costs: reduce the size of the
hospital work force, or reduce services and programs, or both. Hospitals are reluctant to
reduce their work force, because doing so jeopardizes their ability to do their job well --
hospitals are very labor-intensive institutions. Similarly, it is often easier to eliminate certain
services than to restructure services in order to cross-subsidize care. Hospitals will continue
to work to provide care more efficiently. But, given these economic facts of life, additional
Medicare payment reductions would be felt more deeply than ever by hospitals, patients, and
the communities they serve.
Such reductions also threaten the ability of hospitals to participate in health care reform.
Expanding the covered population, restructuring the delivery system, reconfiguring hospitals
and other services for the future, and investing in new technologies to meet the demands of
the new system -- all will need adequate resources. For example, the infrastructure
improvements we all endorse in order to reduce administrative costs -- electronic billing,
computerized patient records, new information systems -- will require an up-front
investment.
EMBARGOED UNTIL 10:00AM TUES. APRIL 12 Page 6
Specifically for hospitals, getting beyond the traditional acute care role that will be necessary
under reform would be jeopardized by excessive spending reductions. For example,
consumer education, wellness, and outreach programs -- not funded by the current system --
are among the most vulnerable when finances are squeezed.
Alternative sources of financing health care reform are available to spread the cost of reform
more broadly, beyond hospitals, physicians, and other health care professionals who will
already be deeply affected by change. For example, more than $75 billion could be raised
by increasing or imposing federal excise taxes on handguns, assault weapons, ammunition,
tobacco and alcohol. Significantly, the use of many of these items often contributes to poor
health and hospital emergency department visits.
IMPLICATIONS FOR PATIENTS AND COMMUNITIES
Hospitals want to see reform done right. Many hospitals have already begun to provide care
in more cost-effective, collaborative ways. For example, ProPAC reports that the number of
hospitals with health maintenance organization and preferred provider contracts increased
from 37 percent in 1985 to nearly 62 percent in 1992. And, ProPAC also reports that in
1993, more than 30 percent of the nation's hospitals were involved in collaborative
relationships with physicians, whether a formal physician/hospital organization (14 percent),
a management services organization (7 percent), or a foundation that negotiated managed
care contracts for the hospital and physicians as a unit (4 percent). Forming collaborative
provider networks and reconfiguring services for the future, however, present major financial
EMBARGOED UNTIL 10:00AM TUES. APRIL 12 Page 7
and organizational challenges for hospitals. It is unfair to expect hospitals to deliver on
health care reform and pay for it, too, through deeper Medicare spending reductions.
We understand that not all hospitals will survive in a reformed health care system. In fact,
the kind of massive restructuring that we propose will result in mergers, consolidations, and
closures -- this is the most responsible and thoughtful way to reduce excess capacity and
eliminate overlap and duplication in high technology and services.
But the kinds of indiscriminate Medicare spending reductions proposed hit hardest on the
most financially vulnerable institutions -- those barely breaking even or already operating at a
loss and those treating large numbers of Medicare beneficiaries. These hospitals may be the
very facilities that need to remain open to assure access and coverage to underserved
populations and achieve the broader goals of health care reform. Hospital closures should be
based on the needs of communities, not on a particular hospital's financial health. Decisions
to merge or close facilities should be made at the local level within the community.
RESTRUCTURED DELIVERY SYSTEM AND MEDICARE "INTEGRATION"
The size of proposed Medicare reductions presents another obstacle for achieving
fundamental health care reform -- it creates a greater-than-ever schism between how we pay
for and provide care for Medicare beneficiaries and for the rest of the population. This is
the opposite direction of where we want to go.
EMBARGOED UNTIL 10:00AM TUES. APRIL 12 Page 8
Currently, Medicare beneficiaries are presented with a delivery system that stresses
specialization over primary care; administrative complexity over simplicity; and fragmented
care rather than coordinated care. Many of us have had the experience of helping an elderly
friend or family member deal with stacks of confusing bills and forms, or trying to
coordinate their medical care between the physician and the hospital or some other health
care provider.
At the same time, some Medicare beneficiaries still face barriers to receiving basic primary
care. According to the Physician Payment Review Commission, the independent
congressional commission overseeing payment to physicians under Medicare and Medicaid,
the lack of availability of primary care is the most common complaint made by Medicare
beneficiaries.
We believe it's absolutely essential that the Medicare population be part of the same
reformed system as other Americans -- that Medicare beneficiaries be "integrated" into
reform. And, just as strongly, we believe that the reformed health care system include the
kinds of collaborative provider networks we touched on earlier. In AHA's reform vision,
such collaborative arrangements are called "community care networksˢM" -- locally based,
networks of hospitals, doctors, other health care providers, and social service and community
agencies, working together to improve the health of people in the community.
EMBARGOED UNTIL 10:00AM TUES. APRIL 12 Page 9
Community care networks focus on primary care, prevention, and coordinating care to
ensure that all patients -- young and old -- receive the right kind of care at the right time and
in the most appropriate setting. A capitated payment system -- an upfront fee for each
enrolled person -- improves efficiency and creates the proper incentives for providers to work
together to keep patients healthy.
Networks would also help patients navigate the complex maze of available health care
services. This is particularly important for Medicare patients, because they use more
services more often.
In addition, if the Medicare and non-Medicare populations are part of the same reformed
health care system, providers would have the same incentives to deliver appropriate and cost-
effective care to Medicare beneficiaries as they would for other patients. Imagine hospitals
trying to improve coordination and efficiency if more than 30 percent of what they do is
driven by a set of incentives that represent the inefficiencies of our current fragmented
system -- which would be the case if Medicare, comprising, on average, a third of hospitals'
patient revenue, remains out of the reformed health care system of the future.
But it is not clear that these opportunities for better patient care and more efficient case
management will be available to Medicare beneficiaries and encouraged under health care
reform. As a first step, all reform plans should encourage Medicare beneficiaries to join
managed care plans where available. Interest and participation could be increased through
EMBARGOED UNTIL 10:00AM TUES. APRIL 12 Page 10
education and information about the advantages managed care offers, by providing financial
incentives or increased benefits for joining managed care plans, and by expanding the types
and numbers of managed care plans offered to Medicare beneficiaries to allow them more
flexibility to choose their own physician. We support these and a number of similar
initiatives contained in Sen. Dave Durenberger's (R-MN) bill, S. 1996, that work toward
these ends.
Integrating Medicare patients into the reformed delivery system makes good public policy
sense. But more importantly, it makes good sense for the older Americans we serve.
CONCLUSION
Hospitals have been and will continue be a constructive force as our nation moves toward a
fundamentally reformed health care system. We believe our role on the front line of health
care delivery gives us valuable insight and experience to bring to that process. We are
willing to contribute to the shared sacrifice that will inevitably be part of reform. Our vision
of reform does just that, with its incentives for economic discipline and dramatic changes in
the structure of health care delivery.
What we are not willing to do, however, is jeopardize the quality of the health care we
deliver to our Medicare patients, and to all our patients. We firmly believe that the
Medicare spending reductions proposed in the Administration's plan and in many other
congressional health reform proposals would undercut our ability to deliver high quality care.
EMBARGOED UNTIL 10:00AM TUES. APRIL 12 Page 11
Continued Medicare reductions are likely to result in further staffing reductions, delays in
purchasing new equipment, postponing the upgrading of facilities, closing certain services in
order to maintain other services at peak quality, and jeopardizing the research and education
programs that have kept America's health system on the cutting edge of scientific
development.
In addition, we believe it is absolutely essential that the Medicare population be part of the
same reformed system as other Americans, and that the reformed system expand managed
care opportunities for Medicare patients and for all patients. Only through such Medicare
"integration" will beneficiaries have strong incentives to seek cost-effective care and their
providers have consistent incentives to treat them in the most cost-effective way.
It is for these reasons that we urge you to reject Medicare reductions contained in the
Administration's plan and in other congressional reform proposals and instead consider the
many alternative sources of financing available as your committee goes about the difficult
work of shaping health care reform. And, we urge you to include Medicare beneficiaries
under the reform umbrella as the best way to work toward more cost-effective delivery of
care for these patients.
m Community Care Network, Inc. uses the name Community Care Network as its service mark and reserves all
rights.
EMBARGOED UNTIL 10:00AM TUES. APRIL 12 Page 12
NOTICE
This document is not
available for public
release until 10:00 a.m.
Eastern time, Tuesday,
April 12, 1994
MEDICARE REDUCTIONS:
UNFAIR TO EXPECT HOSPITALS
TO DELIVER ON HEALTH CARE REFORM
AND PAY FOR IT TOO
BACKGROUND:
Hospitals support comprehensive health care reform centered on three goals:
Guaranteed coverage and access to care;
More efficient and effective delivery of care; and
Fair financing.
Hospitals understand that extending health coverage to the uninsured will take additional
resources. We cannot, however, support unprecedented reductions in Medicare funding as a
major source of these resources. Such reductions would be counter productive -- they would
undermine our ability to achieve reform and threaten patient services.
For example, health care reform -- forming collaborative provider networks; reconfiguring
hospitals and other services for the future -- will present major financial and organizational
challenges for hospitals. It is unfair to expect hospitals to deliver on health care reform and
pay for it too through deeper Medicare spending reductions.
Many of the congressional health care reform proposals would make unprecedented cut backs
in the rate of increase in Medicare spending to pay for reform. The President's proposal
would reduce Medicare spending by $118 billion over the next six years in order to finance
health care reform. This is twice the size of any reductions previously taken from Medicare.
Other proposals, including those offered by Representative Pete Stark (D-CA), Representative
Jim Cooper (D-TN), and Senator John Chafee (R-RI) also would reduce Medicare spending by
significantly more than ever before.
Outside the health care reform debate, many members of Congress favor limiting future
spending on entitlement programs, including Medicare and Medicaid. Others support a
requirement to balance the federal budget on an annual basis -- an approach that would hit hard
on the largest federal programs, particularly Medicare.
Alternative sources of financing health care reform are available to spread the cost of reform
more broadly, beyond hospitals, physicians, and other health care professionals who will
already be deeply affected by change. For example, increasing alcohol and cigarette excise
taxes ($86 billion), scaling back nuclear weapons production ($3 billion), and asking host
nations to share in more of the cost of U.S. troops stationed abroad ($10 billion) would raise
nearly $100 billion over five years toward health care reform financing.
STUDY FINDINGS:
New estimates prepared by Lewin-VHI look at the impact on hospitals of Medicare spending
reductions. It is important to note that these estimates do not pretend to predict the future with
any certainty -- they are highly sensitive to underlying assumptions about future growth in
hospital costs. However, these estimates are illustrative of the kinds of pressures that hospitals
face if Medicare spending reductions alone of this magnitude are enacted.
The Prospective Payment Assessment Commission (ProPAC) has already concluded that today,
payments to hospitals under Medicare's Prospective Payment System do not keep pace with
hospitals' costs. The new Lewin-VHI estimates confirm that this pattern will likely continue.
The study uses the President's plan -- the most detailed available -- as an example. Among
the health care providers and Medicare beneficiaries who would be affected by the President's
Medicare spending reductions, administration estimates show that hospitals are hardest hit,
taking $70 billion of the $118 billion in proposed reductions.
Data show that reductions like these, with no accompanying reform steps such as expanding
health care coverage, could cause significant financial losses for hospitals. Losses might be
attenuated by reducing the rate of growth in hospital costs. But hospitals are concerned that
losses of this size can not be made up through increased efficiency. Medicare reductions could
undermine hospitals' ability to transform and improve the health care system for patients and
threaten their ability to continue to deliver quality care in the communities they serve.
The Lewin-VHI data show:
By the year 2000, after six years of spending reductions, Medicare could pay hospitals
only 71 cents for every dollar of inpatient care delivered to a Medicare patient. The
overall Medicare Prospective Payment System (PPS) inpatient operating margins for all
hospitals in the U.S. could be negative 29 percent (see table 3).
These spending reductions could make the Medicare program an even poorer payer
than the Medicaid program is today, which currently pays hospitals 82 cents on the
dollar.
Coping with the spending reductions already enacted in the Omnibus Budget
Reconciliation Act (OBRA 1993) will be difficult enough for hospitals. Lewin-VHI data
show that by the year 2000, the overall Medicare PPS inpatient operating margin for all
hospitals in the U.S. would be negative 12 percent as a result of changes enacted in OBRA
1993 (see table 1). The additional reductions proposed by the President could lower this
margin by an additional 17 percentage points (see table 3).
Particularly hard hit are teaching hospitals, hospitals in large urban areas, and
hospitals serving a disproportionately large number of low-income patients. By the
year 2000, Medicare PPS inpatient operating margins could be reduced by 22 percentage
points for teaching hospitals; reduced by 19 percentage points for large urban hospitals; and
reduced by 26 percentage points for hospitals receiving both indirect medical education and
disproportionate share adjustments.
After six years, regardless of hospital type -- large or small, urban or rural, teaching
or non-teaching -- most hospitals face significant Medicare losses. Under current law,
Medicare PPS inpatient operating margins for various types of hospitals are expected to
average between positive 4 percent and a negative 18.5 percent (see table 1). If the
President's reductions were enacted, Lewin-VHI data suggest these margins could average
between a negative 19.9 percent and a negative 32.2 percent (see table 3).
All states are negatively affected. After the enactment of OBRA 1993, hospital margins
varied considerably by state (see table 2). But Lewin-VHI data show that if the Medicare
reductions proposed by the President are enacted, all states would lose significant shares of
revenue, driving Medicare PPS inpatient operating margins down (see table 4).
IMPLICATIONS:
Medicare spending reductions have serious implications for the future of health care reform,
hospitals, patients, and communities.
Hospitals may be without the resources needed to achieve comprehensive reform -- to
reconfigure the way in which they deliver care to be more efficient and to refocus on the
health of the patients and communities they serve.
Cuts will be felt by hospitals, patients, and communities more deeply than ever before. In
the past, hospitals have been able to shift unfunded costs to other non-government payers,
meaning higher costs for patients and employers. But this avenue will be narrowed, if not
closed, by the current rapid growth in managed care in the private sector as well as by
many of the comprehensive health care reform proposals that propose to limit private sector
spending. Thus, hospitals will have to cut costs which could mean personnel and service
cutbacks.
Some communities may see their hospitals close for the wrong reasons -- not because they
are no longer needed, but because they are financially weak. The kinds of Medicare
spending reductions proposed hit hardest on the most financially vulnerable hospitals --
those barely breaking even or already operating at a loss and those that treat large numbers
of Medicare beneficiaries. These hospitals may be the very ones that need to remain open
to assure access and coverage to underserved populations and achieve the broader goals of
health care reform.
Table 1:
4/4/94
Projected Medicare PPS Inpatient Operating Margins by Hospital Group Under OBRA 93
Pre OBRA 93
OBRA 93
N
1991*
1992
1993
1994
1995
1996
1997
1998
1999
2000
All Hospitals
5185
-3.3%
-4.0%
-4.1%
-6.4%
-8.8%
-10.9%
-11.7%
-11.9%
-12.0%
-12.2%
All Teaching Hospitals
1008
1.1%
-0.5%
-0.3%
-2.1%
-4.4%
-6.3%
-7.1%
-7.2%
-7.1%
-7.1%
Major Teaching
213
8.3%
7.8%
8.3%
7.6%
5.7%
4.1%
3.5%
3.5%
3.7%
4.0%
Minor Teaching
795
-2.3%
-4.3%
-4.4%
-6.6%
-9.2%
-11.3%
-12.1%
-12.3%
-12.3%
-12.4%
Non-Teaching
4177
-7.8%
-7.7%
-7.9%
-10.9%
-13.3%
-15.7%
-16.6%
-16.8%
-17.1%
-17.4%
Type of Hospital
Urban
2914
-3.1%
-4.5%
-4.6%
-6.1%
-8.6%
-10.7%
-11.4%
-11.6%
-11.6%
-11.7%
Large Urban
1545
-1.9%
-3.6%
-3.5%
-4.5%
-7.0%
-9.0%
-9.8%
-9.9%
-9.9%
-10.0%
Other Urban
1369
-4.9%
-6.0%
-6.2%
-8.5%
-11.0%
-13.1%
-13.9%
-13.9%
-14.1%
-14.2%
Rural
2271
-4.2%
-0.7%
-0.8%
-8.5%
-10.1%
-12.7%
-14.0%
-14.6%
-15.1%
-15.7%
Sole Community
541
1.0%
1.6%
1.6%
-9.8%
-9.9%
-12.6%
-13.9%
-14.5%
-15.1%
-15.8%
Sole Comm and Rural Referral
46
4.1%
9.4%
9.4%
-2.1%
-5.0%
-7.5%
-8.6%
-9.1%
-9.6%
-10.0%
Rural Referral
188
-5.9%
-3.1%
-3.0%
-9.1%
-12.1%
-14.5%
-15.6%
-15.9%
-16.3%
-16.6%
Other Rural
1496
-6.4%
-1.7%
-1.8%
-8.8%
-9.6%
-12.3%
-13.7%
-14.5%
-15.3%
-16.0%
Payment Adjustments
IME & Disp Share
483
4.1%
2.8%
3.2%
1.9%
-0.3%
-2.2%
-3.0%
-3.1%
-2.9%
-2.8%
IME Only
774
-5.0%
-5.5%
-6.3%
-8.5%
-11.1%
-13.6%
-14.7%
-15.1%
-15.4%
-15.7%
Disp Share Only
383
-4.0%
-5.4%
-5.5%
-8.1%
-10.7%
-12.7%
-13.6%
-13.6%
-13.7%
-13.8%
None
3545
-6.9%
-7.0%
-7.1%
-10.0%
-12.3%
-14.6%
-15.4%
-15.5%
-15.8%
-16.1%
Medicare Proportion of Rev.
Over 60%
1175
-6.6%
-7.2%
-7.4%
-11.2%
-13.7%
-16.3%
-17.4%
-17.8%
-18.2%
-18.5%
Under 60%
4010
-2.7%
-3.5%
-3.6%
-5.7%
-8.0%
-10.1%
-10.9%
-11.0%
-11.1%
-11.2%
Size
1-50 Beds
1362
-4.5%
-2.1%
-2.4%
-9.3%
-10.5%
-13.3%
-14.7%
-15.5%
-16.4%
-17.3%
50-99 Beds
1123
-6.0%
-4.7%
-5.0%
-10.1%
-11.8%
-14.5%
-15.9%
-16.6%
-17.2%
-17.9%
100-199 Beds
1226
-5.8%
-5.5%
-5.8%
-9.0%
-11.5%
-14.0%
-15.0%
-15.4%
-15.7%
-16.1%
200-299 Beds
670
-5.6%
-6.3%
-6.5%
-8.7%
-11.4%
-13.6%
-14.5%
-14.8%
-14.9%
-15.1%
300+ Beds
804
-1.0%
-2.5%
-2.5%
-4.0%
-6.3%
-8.2%
-8.8%
-8.8%
-8.7%
-8.7%
Ownership
Church
674
-3.9%
-4.9%
-5.2%
-7.0%
-9.3%
-11.2%
-11.9%
-11.9%
-11.9%
-11.9%
Voluntary
2327
-2.9%
-3.8%
-3.8%
-6.4%
-8.9%
-11.2%
-12.1%
-12.4%
-12.5%
-12.7%
Proprietary
748
-5.6%
-6.5%
-6.4%
-7.4%
-9.4%
-11.2%
-11.5%
-11.2%
-11.2%
-11.3%
Government
1436
-1.6%
-1.6%
-1.6%
-4.8%
-6.9%
-9.2%
-10.2%
-10.5%
-10.8%
-11.1%
* Actual
Lewin-VHI, Inc.
Table 2:
4/4/94
Projected Medicare PPS Inpatient Operating Margins by State Under OBRA 93
Pre OBRA 93
OBRA 93
N
1991*
1992
1993
1994
1995
1996
1997
1998
1999
2000
State
Alabama
116
-2.5%
-3.3%
-3.3%
-5.6%
-7.5%
-9.3%
-9.5%
-9.3%
-9.4%
-9.5%
Alaska
16
-1.4%
-2.6%
-2.7%
-13.4%
-14.7%
-16.5%
-16.6%
-16.3%
-16.4%
-16.6%
Arizona
57
1.2%
0.4%
0.5%
-0.7%
-2.2%
-3.3%
-3.0%
-2.3%
-1.9%
-1.6%
Arkansas
81
-0.1%
-1.5%
-1.9%
-8.3%
-10.7%
-13.2%
-14.1%
-14.5%
-15.0%
-15.6%
California
437
-0.1%
-2.4%
-2.4%
-2.4%
-4.4%
-6.0%
-6.1%
-5.9%
-5.9%
-5.9%
Colorado
67
-4.4%
-2.7%
-2.8%
-5.1%
-7.3%
-9.3%
-9.8%
-9.8%
-10.2%
-10.6%
Connecticut
34
-11.8%
-15.1%
-14.6%
-16.3%
-20.1%
-23.3%
-25.7%
-26.6%
-27.4%
-28.1%
Delaware
7
-12.0%
-12.4%
-12.0%
-14.8%
-16.6%
-18.3%
-18.4%
-18.0%
-17.8%
-17.6%
Washington DC
9
-3.5%
-7.2%
-7.4%
-9.1%
-11.2%
-12.8%
-12.9%
-12.5%
-12.5%
-12.5%
Florida
219
-9.2%
-10.3%
-9.7%
-10.3%
-12.2%
-13.6%
-13.5%
-12.9%
-12.6%
-12.3%
Georgia
160
-7.8%
-6.6%
-6.8%
-9.6%
-11.9%
-14.1%
-14.8%
-14.9%
-15.4%
-15.8%
Hawaii
20
-14.1%
-22.0%
-22.7%
-28.8%
-32.2%
-35.7%
-37.1%
-37.6%
-38.6%
-39.5%
Idaho
42
-0.1%
3.2%
1.2%
-6.6%
-8.7%
-11.0%
-11.7%
-12.0%
-12.4%
-12.9%
Illinois
204
-7.0%
-9.1%
-8.7%
-10.3%
-12.3%
-14.0%
-15.2%
-15.0%
-14.9%
-14.8%
Indiana
116
-11.5%
-12.0%
-11.9%
-15.3%
-17.9%
-20.1%
-21.7%
-21.8%
-22.2%
-22.5%
lowa
123
-6.8%
-4.8%
-5.1%
-10.1%
-12.4%
-14.8%
-15.6%
-15.9%
-16.3%
-16.6%
Kansas
131
-5.6%
-6.3%
-6.5%
-10.2%
-12.1%
-14.2%
-14.7%
-14.7%
-15.0%
-15.3%
Kentucky
104
-4.2%
-5.3%
-5.2%
-8.1%
-9.9%
-11.8%
-12.1%
-11.9%
-11.9%
-11.9%
Louisiana
138
-11.2%
-11.6%
-11.3%
-11.5%
-13.3%
-15.0%
-15.2%
-14.8%
-14.8%
-14.9%
Maine
39
-9.0%
-13.1%
-13.6%
-16.1%
-18.8%
-21.7%
-24.1%
-24.8%
-25.6%
-26.4%
Maryland **
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
Massachusetts
99
2.7%
1.3%
0.9%
-1.2%
-3.9%
-6.2%
-7.7%
-8.1%
-8.4%
-8.6%
Michigan
171
1.1%
-1.2%
-0.8%
-3.6%
-5.6%
-7.5%
-8.7%
-8.6%
-8.5%
-8.4%
Minnesota
149
2.8%
1.4%
0.4%
-3.5%
-6.1%
-8.7%
-9.8%
-10.4%
-11.1%
-11.8%
Mississippi
104
-1.3%
-0.8%
-0.8%
-6.0%
-7.7%
-9.9%
-10.4%
-10.6%
-10.8%
-11.0%
Missouri
132
-4.3%
-7.8%
-7.2%
-9.9%
-12.0%
-13.8%
-14.0%
-13.8%
-13.9%
-13.9%
Montana
54
-0.9%
-0.2%
-0.2%
-8.5%
-10.2%
-12.3%
-12.8%
-12.9%
-13.3%
-13.7%
** Projections were not made for Maryland, which operates an all-payer rate setting system under a waiver
from the Medicare program.
* Actual
Lewin-VHI, Inc.
Table 2:
4/4/94
Projected Medicare PPS Inpatient Operating Margins by State Under OBRA 93
Pre OBRA 93
OBRA 93
N
1991*
1992
1993
1994
1995
1996
1997
1998
1999
2000
State
Nebraska
89
-14.6%
-13.0%
-13.3%
-12.3%
-14.1%
-16.0%
-16.3%
-16.1%
-16.3%
-16.4%
Nevada
22
-4.6%
-4.8%
-4.1%
-3.5%
-4.6%
-5.2%
-4.6%
-3.5%
-3.4%
-3.3%
New Hampshire
26
-18.5%
-16.6%
-16.3%
-13.5%
-16.3%
-18.8%
-20.5%
-20.8%
-21.0%
-21.2%
New Jersey
88
-9.6%
-11.4%
-10.8%
-12.7%
-16.7%
-20.3%
-22.3%
-23.7%
-24.3%
-24.8%
New Mexico
35
9.4%
9.4%
9.5%
3.7%
2.3%
0.5%
0.2%
0.3%
0.3%
0.3%
New York
218
7.8%
8.7%
8.5%
6.9%
3.8%
0.7%
-1.3%
-2.9%
-2.6%
-2.4%
North Carolina
126
-6.1%
-1.5%
-2.3%
-5.0%
-8.1%
-11.0%
-12.4%
-13.3%
-14.0%
-14.6%
North Dakota
48
-4.5%
-1.8%
-1.3%
-6.7%
-8.0%
-9.5%
-9.4%
-9.0%
-8.7%
-8.5%
Ohio
185
-6.5%
-6.7%
-6.7%
-11.3%
-13.7%
-15.6%
-17.1%
-17.0%
-17.0%
-17.0%
Oklahoma
115
0.8%
-0.1%
0.0%
-6.9%
-9.1%
-11.4%
-12.0%
-12.3%
-12.7%
-13.1%
Oregon
65
8.1%
4.1%
4.2%
-2.1%
-4.2%
-6.1%
-6.5%
-6.5%
-6.6%
-6.8%
Pennsylvania
218
-2.4%
-3.0%
-2.9%
-4.9%
-7.3%
-9.2%
-9.7%
-9.8%
-9.9%
-10.1%
Rhode Island
12
3.8%
1.9%
4.9%
0.1%
-2.5%
-4.7%
-6.0%
-6.3%
-6.4%
-6.6%
South Carolina
69
-13.9%
-9.3%
-9.6%
-11.6%
-14.3%
-16.9%
-17.9%
-18.4%
-18.5%
-18.7%
South Dakota
53
-2.5%
-2.6%
-2.8%
-8.3%
-9.8%
-11.4%
-11.7%
-11.6%
-11.7%
-11.8%
Tennessee
132
-6.9%
-10.6%
-10.4%
-12.4%
-14.3%
-16.1%
-16.4%
-16.2%
-16.3%
-16.4%
Texas
398
-6.8%
-7.6%
-9.6%
-9.9%
-12.0%
-13.9%
-14.2%
-14.0%
-14.2%
-14.4%
Utah
39
7.5%
9.2%
9.5%
5.4%
3.4%
1.6%
1.3%
1.2%
1.1%
0.9%
Vermont
15
-10.9%
-11.2%
-11.8%
-18.1%
-21.0%
-24.2%
-26.7%
-27.4%
-28.0%
-28.6%
Virginia
99
-6.2%
-6.9%
-7.0%
-10.8%
-13.2%
-15.5%
-16.1%
-16.3%
-16.6%
-16.9%
Washington
92
2.7%
2.3%
1.6%
-1.8%
-4.3%
-6.5%
-7.2%
-7.5%
-7.9%
-8.4%
West Virginia
58
-7.1%
-5.4%
-5.4%
-14.1%
-16.8%
-19.5%
-20.5%
-21.0%
-21.5%
-22.1%
Wisconsin
128
0.6%
0.8%
0.5%
-4.7%
-6.9%
-8.9%
-10.4%
-10.5%
-10.8%
-11.1%
Wyoming
26
-1.8%
-12.6%
-10.7%
-23.7%
-24.7%
-26.7%
-27.1%
-26.9%
-27.4%
-27.3%
*
Actual
Lewin-VHI, Inc.
Table 3:
4/4/94
Projected Medicare PPS Inpatient Operating Margins by Hospital Group Under the Health Security Act
Pre OBRA 93
OBRA 93
Health Security Act
N
1991*
1992
1993
1994
1995
1996
1997
1998
1999
2000
All Hospitals
5185
-3.3%
-4.0%
-4.1%
-6.4%
-10.4%
-14.8%
-17.5%
-23.7%
-26.3%
-28.9%
All Teaching Hospitals
1008
1.1%
-0.5%
-0.3%
-2.1%
-7.5%
-14.0%
-16.6%
-24.4%
-26.8%
-29.3%
Major Teaching
213
8.3%
7.8%
8.3%
7.6%
0.2%
-10.2%
-12.6%
-24.9%
-27.0%
-29.2%
Minor Teaching
795
-2.3%
-4.3%
-4.4%
-6.6%
-11.0%
-15.6%
-18.3%
-24.2%
-26.7%
-29.3%
Non-Teaching
4177
-7.8%
-7.7%
-7.9%
-10.9%
-13.3%
-15.7%
-18.4%
-23.0%
-25.7%
-28.5%
Type of Hospital
Urban
2914
-3.1%
-4.5%
-4.6%
-6.1%
-10.4%
-15.1%
-17.7%
-24.2%
-26.7%
-29.3%
Large Urban
1545
-1.9%
-3.6%
-3.5%
-4.5%
-9.2%
-14.5%
-17.1%
-24.1%
-26.5%
-29.0%
Other Urban
1369
-4.9%
-6.0%
-6.2%
-8.5%
-12.2%
-16.0%
-18.6%
-24.4%
-27.0%
-29.7%
Rural
2271
-4.2%
-0.7%
-0.8%
-8.5%
-10.2%
-13.1%
-16.1%
-20.3%
-23.3%
-26.4%
Sole Community
541
1.0%
1.6%
1.6%
-9.8%
-9.9%
-12.6%
-15.7%
-20.5%
-23.5%
-26.6%
Sole Comm and Rural Referral
46
4.1%
9.4%
9.4%
-2.1%
-5.0%
-7.5%
-10.2%
-14.4%
-17.1%
-19.9%
Rural Referral
188
-5.9%
-3.1%
-3.0%
-9.1%
-12.6%
-15.8%
-18.7%
-23.6%
-26.5%
-29.3%
Other Rural
1496
-6.4%
-1.7%
-1.8%
-8.8%
-9.5%
-12.3%
-15.6%
-19.1%
-22.2%
-25.4%
Payment Adjustments
IME & Disp Share
483
4.1%
2.8%
3.2%
1.9%
-3.8%
-10.8%
-13.4%
-24.6%
-26.8%
-29.0%
IME Only
774
-5.0%
-5.5%
-6.3%
-8.5%
-11.1%
-13.6%
-16.5%
-24.6%
-27.4%
-30.2%
Disp Share Only
383
-4.0%
-5.4%
-5.5%
-8.1%
-13.1%
-18.6%
-21.3%
-23.9%
-26.4%
-29.0%
None
3545
-6.9%
-7.0%
-7.1%
-10.0%
-12.9%
-15.9%
-18.5%
-22.9%
-25.7%
-28.4%
Medicare Proportion of Rev.
Over 60%
1175
-6.6%
-7.2%
-7.4%
-11.2%
-14.1%
-17.1%
-20.1%
-23.2%
-26.0%
-28.8%
Under 60%
4010
-2.7%
-3.5%
-3.6%
-5.7%
-9.8%
-14.5%
-17.1%
-23.8%
-26.3%
-28.9%
Size
1-50 Beds
1362
-4.5%
-2.1%
-2.4%
-9.3%
-10.3%
-13.3%
-16.4%
-18.6%
-21.8%
-25.1%
50-99 Beds
1123
-6.0%
-4.7%
-5.0%
-10.1%
-11.8%
-14.7%
-17.9%
-21.3%
-24.3%
-27.5%
100-199 Beds
1226
-5.8%
-5.5%
-5.8%
-9.0%
-11.8%
-14.7%
-17.6%
-23.5%
-26.3%
-29.2%
200-299 Beds
670
-5.6%
-6.3%
-6.5%
-8.7%
-12.3%
-15.8%
-18.6%
-24.6%
-27.2%
-29.9%
300+ Beds
804
-1.0%
-2.5%
-2.5%
-4.0%
-8.9%
-14.6%
-17.0%
-24.0%
-26.3%
-28.7%
Ownership
Church
674
-3.9%
-4.9%
-5.2%
-7.0%
-10.4%
-13.8%
-16.3%
-21.5%
-23.9%
-26.4%
Voluntary
2327
-2.9%
-3.8%
-3.8%
-6.4%
-10.9%
-16.0%
-18.8%
-25.1%
-27.7%
-30.4%
Proprietary
748
-5.6%
-6.5%
-6.4%
-7.4%
-9.7%
-12.0%
-13.9%
-18.3%
-20.6%
-23.0%
Government
1436
-1.6%
-1.6%
-1.6%
-4.8%
-8.9%
-14.2%
-17.0%
-26.4%
-29.3%
-32.2%
Alabama
116
-2.5%
-3.3%
-3.3%
-5.6%
-8.3%
-11.3%
-13.2%
-16.9%
-19.3%
-21.8%
Alaska
16
-1.4%
-2.6%
-2.7%
-13.4%
-14.7%
-16.5%
-18.4%
-25.7%
-28.3%
-31.0%
*
Actual
Lewin-VHI, Inc.
Table 4:
4/4/94
Projected Medicare PPS Inpatient Operating Margins by State Under the Health Security Act
Pre OBRA 93
OBRA 93
Health Security Act
N
1991*
1992
1993
1994
1995
1996
1997
1998
1999
2000
State
Arizona
57
1.2%
0.4%
0.5%
-0.7%
-3.3%
-5.9%
-7.2%
-11.0%
-12.8%
-14.6%
Arkansas
81
-0.1%
-1.5%
-1.9%
-8.3%
-11.1%
-14.1%
-16.8%
-19.8%
-22.7%
-25.7%
California
437
-0.1%
-2.4%
-2.4%
-2.4%
-5.4%
-8.4%
-10.2%
-18.3%
-20.6%
-23.0%
Colorado
67
-4.4%
-2.7%
-2.8%
-5.1%
-8.5%
-12.2%
-14.5%
-17.7%
-20.5%
-23.3%
Connecticut
34
-11.8%
-15.1%
-14.6%
-16.3%
-23.7%
-32.3%
-37.0%
-42.4%
-46.1%
-49.8%
Delaware
7
-12.0%
-12.4%
-12.0%
-14.8%
-19.2%
-24.7%
-26.8%
-28.8%
-31.2%
-33.6%
Washington DC
9
-3.5%
-7.2%
-7.4%
-9.1%
-15.9%
-24.6%
-26.6%
-37.4%
-40.1%
-42.8%
Florida
219
-9.2%
-10.3%
-9.7%
-10.3%
-12.7%
-14.8%
-16.3%
-20.1%
-22.1%
-24.2%
Georgia
160
-7.8%
-6.6%
-6.8%
-9.6%
-12.9%
-16.5%
-19.0%
-25.6%
-28.5%
-31.5%
Hawaii
20
-14.1%
-22.0%
-22.7%
-28.8%
-33.8%
-39.7%
-43.4%
-54.7%
-58.8%
-63.1%
Idaho
42
-0.1%
3.2%
1.2%
-6.6%
-8.8%
-11.4%
-13.8%
-16.3%
-19.0%
-21.8%
Illinois
204
-7.0%
-9.1%
-8.7%
-10.3%
-14.3%
-18.8%
-21.9%
-29.0%
-31.4%
-33.9%
Indiana
116
-11.5%
-12.0%
-11.9%
-15.3%
-19.0%
-22.7%
-26.3%
-30.5%
-33.4%
-36.4%
lowa
123
-6.8%
-4.8%
-5.1%
-10.1%
-13.4%
-17.2%
-19.8%
-24.0%
-26.8%
-29.7%
Kansas
131
-5.6%
-6.3%
-6.5%
-10.2%
-13.3%
-17.1%
-19.5%
-23.9%
-26.6%
-29.4%
Kentucky
104
-4.2%
-5.3%
-5.2%
-8.1%
-10.6%
-13.5%
-15.6%
-21.4%
-23.8%
-26.2%
Louisiana
138
-11.2%
-11.6%
-11.3%
-11.5%
-14.1%
-16.9%
-18.9%
-25.5%
-27.8%
-30.3%
Maine
39
-9.0%
-13.1%
-13.6%
-16.1%
-20.1%
-24.7%
-29.2%
-36.5%
-40.1%
-43.7%
Maryland **
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
Massachusetts
99
2.7%
1.3%
0.9%
-1.2%
-6.8%
-13.3%
-16.9%
-23.3%
-26.0%
-28.9%
Michigan
171
1.1%
-1.2%
-0.8%
-3.6%
-8.2%
-13.8%
-17.0%
-22.8%
-25.1%
-27.4%
Minnesota
149
2.8%
1.4%
0.4%
-3.5%
-8.6%
-14.7%
-17.6%
-21.1%
-24.3%
-27.6%
Mississippi
104
-1.3%
-0.8%
-0.8%
-6.0%
-7.9%
-10.4%
-12.8%
-21.7%
-24.3%
-27.0%
Missouri
132
-4.3%
-7.8%
-7.2%
-9.9%
-13.6%
-17.8%
-19.9%
-23.5%
-26.0%
-28.5%
Montana
54
-0.9%
-0.2%
-0.2%
-8.5%
-10.2%
-12.3%
-14.6%
-17.6%
-20.3%
-23.1%
** Projections were not made for Maryland, which operates an all-payer rate setting system under a waiver
from the Medicare program.
*
Actual
Lewin-VHI, Inc.
Table 4:
4/4/94
Projected Medicare PPS Inpatient Operating Margins by State Under the Health Security Act
Pre OBRA 93
OBRA 93
Health Security Act
N
1991*
1992
1993
1994
1995
1996
1997
1998
1999
2000
State
Nebraska
89
-14.6%
-13.0%
-13.3%
-12.3%
-15.5%
-19.4%
-21.6%
-26.8%
-29.5%
-32.3%
Nevada
22
-4.6%
-4.8%
-4.1%
-3.5%
-4.8%
-5.8%
-6.8%
-9.4%
-11.4%
-13.4%
New Hampshire
26
-18.5%
-16.6%
-16.3%
-13.5%
-17.6%
-21.9%
-25.6%
-28.4%
-31.2%
-34.0%
New Jersey
88
-9.6%
-11.4%
-10.8%
-12.7%
-18.6%
-25.0%
-29.0%
-35.2%
-38.5%
-41.9%
New Mexico
35
9.4%
9.4%
9.5%
3.7%
1.8%
-0.6%
-2.4%
-7.5%
-9.7%
-11.8%
New York
218
7.8%
8.7%
8.5%
6.9%
1.0%
-6.4%
-10.3%
-22.4%
-24.5%
-26.8%
North Carolina
126
-6.1%
-1.5%
-2.3%
-5.0%
-9.7%
-15.1%
-18.4%
-28.8%
-32.2%
-35.5%
North Dakota
48
-4.5%
-1.8%
-1.3%
-6.7%
-8.4%
-10.5%
-12.2%
-14.0%
-15.9%
-18.0%
Ohio
185
-6.5%
-6.7%
-6.7%
-11.3%
-15.9%
-21.0%
-24.4%
-29.4%
-32.0%
-34.6%
Oklahoma
115
0.8%
-0.1%
0.0%
-6.9%
-9.9%
-13.2%
-15.7%
-20.7%
-23.5%
-26.4%
Oregon
65
8.1%
4.1%
4.2%
-2.1%
-5.3%
-8.8%
-10.9%
-14.6%
-16.9%
-19.4%
Pennsylvania
218
-2.4%
-3.0%
-2.9%
-4.9%
-9.6%
-15.1%
-17.5%
-23.5%
-26.0%
-28.7%
Rhode Island
12
3.8%
1.9%
4.9%
0.1%
-5.4%
-11.8%
-15.1%
-17.8%
-20.2%
-22.8%
South Carolina
69
-13.9%
-9.3%
-9.6%
-11.6%
-15.5%
-19.7%
-22.7%
-33.2%
-36.0%
-38.9%
South Dakota
53
-2.5%
-2.6%
-2.8%
-8.3%
-10.0%
-12.5%
-14.5%
-17.1%
-19.5%
-22.0%
Tennessee
132
-6.9%
-10.6%
-10.4%
-12.4%
-15.3%
-18.6%
-20.7%
-19.1%
-21.6%
-24.1%
Texas
398
-6.8%
-7.6%
-9.6%
-9.9%
-13.0%
-16.3%
-18.5%
-25.1%
-27.7%
-30.4%
Utah
39
7.5%
9.2%
9.5%
5.4%
1.9%
-2.1%
-4.2%
-8.0%
-10.4%
-12.8%
Vermont
15
-10.9%
-11.2%
-11.8%
-18.1%
-23.8%
-31.1%
-35.9%
-40.3%
-43.7%
-47.2%
Virginia
99
-6.2%
-6.9%
-7.0%
-10.8%
-14.5%
-18.7%
-21.2%
-26.8%
-29.7%
-32.6%
Washington
92
2.7%
2.3%
1.6%
-1.8%
-5.3%
-9.1%
-11.5%
-17.4%
-20.2%
-23.2%
West Virginia
58
-7.1%
-5.4%
-5.4%
-14.1%
-18.0%
-22.4%
-25.4%
-32.0%
-35.2%
-38.5%
Wisconsin
128
0.6%
0.8%
0.5%
-4.7%
-8.3%
-12.4%
-15.7%
-19.8%
-22.5%
-25.3%
Wyoming
26
-1.8%
-12.6%
-10.7%
-23.7%
-25.3%
-28.3%
-30.7%
-32.3%
-35.4%
-38.6%
*
Actual
Lewin-VHI, Inc.
KEY ASSUMPTIONS MADE BY LEWIN-VHI
Medicare PPS inpatient operating margins are defined as Medicare inpatient operating
revenue minus Medicare inpatient operating costs divided by Medicare inpatient operating
revenue (R-C)/R.
The following provisions of OBRA 1993 have an impact on hospitals and are included in
the "OBRA 1993" portion of this analysis:
-
Reductions in the PPS update factor
-
Changes in indirect medical education payments
-
Phase-out of day outlier payments
-
Hospital protection against certain changes in the wage index
-
Regional referral center extension
-
Small Medicare-dependent rural hospital payment extension
-
Regional floor extension
The following provisions proposed by the President would have a further impact on
hospitals and are included in the "Medicare Reductions Under the Health Security Act"
portion of this analysis:
-
Reductions in the PPS update factor
-
Reductions in the indirect medical education adjustment
-
Reductions in disproportionate share hospital payments
Margin estimates reflect Medicare PPS inpatient operating revenues and costs only.
Capital and other Medicare revenues (e.g., direct medical education) are not included.
Margin estimates reflect the impact of the proposed Medicare spending reductions and do
not reflect the impact of other provisions included in the Health Security Act.
Hospital costs are assumed to grow by the rate of increase in the hospital market basket
index plus 2.9 percentage points, or about 7.3 percent annually over the projection period.
This rate of growth is about 1 percentage point less than historical rates of growth after
adjusting for inflation.
The Lewin-VHI model is a "static" model, so it does not include behavioral changes (e.g.,
changes in the organization of hospital service delivery) or changes in industry structure
(e.g., no hospital closings or consolidations). This is because it is impossible to predict
which types of hospitals may restructure, consolidate, or close. Moreover, little
information is available to allow experts to model into the future how hospitals and the
health care system generally might respond to the system-wide kinds of regulatory and
market changes being proposed.
-2-
The proposed change to an "all-payer" pool for indirect medical education costs is not
included in the Medicare PPS margin estimates because non-Medicare funds (from regional
and corporate alliances) would also be included in the pool, and would distort the Medicare
PPS-only analysis. Medicare indirect medical education payments, reduced as specified by
the Administration, are included and are assumed to continue until the year 2000.
The Administration's proposal would significantly reduce Medicare disproportionate share
payments as states form health care alliances. Because the timing of states' reform
activities cannot be known, margin estimates assume that OBRA 1993 disproportionate
share provisions continue in effect through 1997 and the disproportionate share provisions
proposed by the Administration are fully implemented in 1998.
No estimates were made for the state of Maryland because the state operates under a
federal waiver and has a distinctive rate setting system.
April 6, 1994
Making the Tough Choices:
Alternative Financing Options for Health Care Reform
OPTIONS FOR INCREASING REVENUES OR REDUCING SPENDING
5-YEARVALUE
INCREASE THE 10 PERCENT EXCISE TAX ON HANDGUNS AND ASSAULT WEAPONS TO
$1 BILLION
35 PERCENT
This option is modeled after legislation, H.R. 3245, introduced by
Congressman Mel Reynolds (D-IL), which would increase the current
10 percent excise tax on handguns to 35 percent. Congressman
Reynolds' legislation would specifically earmark 25 percent of the
proceeds for general health care purposes.
INCREASE THE FEDERAL EXCISE TAX ON CERTAIN ALCOHOLIC BEVERAGES
$5.5 BILLION
Alcohol abuse is responsible for over 100,000 deaths and $100 billion
in economic costs annually. This option would increase the federal
excise tax on alcoholic spirits to $16.00 per proof gallon (from
$13.50), and on wine at a concomitant rate. (Source: Reducing the
Deficit: Spending and Revenue Options, March 1994, Congressional
Budget Office)
INCREASE THE 24 CENTS FEDERAL EXCISE TAX ON A PACK OF CIGARETTES BY
$80 BILLION
$1.25, 50 CENTS MORE THAN THE ADMINISTRATION'S PROPOSAL
Cigarette use causes 419,000 deaths each year and $65 billion in
tobacco-related health care costs and lost productivity. This option,
based on the provision adopted by the House Ways and Means
subcommittee on Health during its markup of health care reform
legislation, would increase the current 24 cents federal excise tax on a
pack of cigarettes by $1.25. The Administration's plan would increase
the federal excise tax on a pack of cigarettes by 75 cents, raising $67
billion over six years, and $56 billion over five years. (Source: House
Ways and Means Subcommittee on Health, March 1994)
For every $15 billion in increased revenues or reduced federal spending,
comprehensive health care coverage can be provided to approximately 1
million people for five years.
LIMIT THE TAX-DEDUCTIBILITY OF EMPLOYER-PAID HEALTH INSURANCE TO THE
$104. 4 BILLION
COST OF AN AVERAGE PLAN
Currently, employees do not pay taxes on income they receive in the
form employer-paid health insurance. In addition, employers are
allowed to deduct the full cost of any health coverage they provide to
their employees. Limiting the amount of tax-free benefits that an
employee can receive to $375 per month ($4500 annually) for family
coverage and $165 per month ($1,980 annually) for individual coverage
increases income tax revenues and payroll tax revenues dramatically.
(Source: Reducing the Deficit: Spending and Revenue Options,
March, 1994, Congressional Budget Office)
SCALE BACK THE SUBSIDY FOR EARLY RETIREES UNDER THE CLINTON PLAN
$15 BILLION
The President's proposal would provide a generous benefit to early
retirees (ages 55-64) and those employers who have obligations to
provide their health coverage, by offering to pay the 80 percent
employer share of premiums for those retirees who have paid into the
Social Security system. Some observers question the fairness of giving
early retiree a subsidy that is greater than those who are either working
or unemployed. (The Health Security Act provides individuals and
families with incomes of less than $40,000 per year a subsidy for their
portion of the health plan premium.) The Administration's proposal
would reduce the early retiree subsidy only for singles with an income
over $90,000 per year or families with an income over $115,000 per
year. If the administration proposal were scaled back to the same
$40,000 subsidy level as applies to the working and the unemployed,
significant savings could be achieved. (Source: The Financial Impact
of the Health Security Act, December 1993, Lewin-VHI, Inc.)
MEANS TEST THE MEDICARE PART B PREMIUM FOR UPPER-INCOME BENFICIARIES
$5.4 BILLION
Currently, beneficiaries only pay 25 percent of the Medicare Part B
premium; the remainder is paid by the federal government through
general revenues. This proposal would require wealthier beneficiaries
(individuals with retirement incomes of $125,000 or more and couples
with retirement incomes of $150,000 or more) to pay the full cost of
the Part B premium. (Source: Reducing the Deficit: Spending and
Revenue Options, March 1994, Congressional Budget Office)
For every $15 billion in increased revenues or reduced federal spending,
comprehensive health care coverage can be provided to approximately 1
million people for five years.
ACCELERATE THE RISE IN THE SOCIAL SECURITY RETIREMENT AGE TO 68 BY THE
$36 BILLION
YEAR 2008
When the Social Security system was established in the mid-1930's and
the retirement age set at 65, average life expectancy was about 60
years. Today, average life expectancy is 76. In other words, Social
Security recipients receive benefits for many more years than
envisioned when the program was enacted. Under current law, the age
for full-benefit Social Security retirement will increase gradually from
65 to 67 between 2000 and 2017. This proposal would raise the
retirement age to 68, increasing by three months each year starting in
1995, until it reached age 68 in 2006. (Source: The Zero Deficit Plan:
A Plan for Eliminating the Federal Budget Deficit by the year 2000,
September 1993, The Concord Coalition)
USE THE FUNDS TARGETED FOR DEFICIT REDUCTION UNDER PRESIDENT CLINTON'S
$59 BILLION
HEALTH CARE REFORM PROPOSAL TO HELP FINANCE THE REFORM EFFORT
Under the President's health care reform proposal, $59 billion in
reduced spending is targeted for deficit reduction over six years (FY
95-2000). It should be noted, however, that the Congressional Budget
Office recently reported that these savings would not be achieved under
the President's health care reform proposal.
IMPOSE A MINIMUM TAX ON FOREIGN-OWNED BUSINESSES OPERATING IN THE
$2.6 BILLION
UNITED STATES
Some evidence suggests that some foreign-owned, multinational
corporations may be attempting to avoid paying U.S. taxes by
manipulating transfer prices and shifting income overseas. When
foreign multinational corporations operating in the U.S. import
materials and services from affiliated companies abroad, the "transfer
price" of imports affects the amount of income that is subject to U.S.
tax. By raising the transfer price of imports, foreign-owned companies
can shift income out of the U.S. to their foreign affiliates and reduce
their U.S. tax. This proposal would impose a minimum tax on all
companies that are at least 25 percent foreign-owned and have
transactions with foreign affiliates in excess of either 10 percent of their
gross income or $2 million annually. (Source: Reducing the Deficit:
Spending and Revenue Options, March 1994, Congressional Budget
Office)
For every $15 billion in increased revenues or reduced federal spending,
comprehensive health care coverage can be provided to approximately 1
million people for five years.
IMPOSE EXCISE TAXES ON WATER POLLUTANTS
$17 BILLION
In 1991, more than 240 million pounds of toxic materials were
discharged by the U.S. manufacturing sector directly into bodies of
water, and more than 400 million pounds were discharged indirectly
through sewers. Toxic pollutants generally include organic chemicals
(such as solvents and dioxins), metals (such as mercury and lead), and
pesticides. This proposal would impose varying tax rates based on a
pollutant's level of toxicity. (Source: Reducing the Deficit: Spending
and Revenue Options, March 1994, Congressional Budget Office)
IMPOSE ONE-TIME EMISSIONS TAX ON NEW CARS AND LIGHT TRUCKS
$13.3 BILLION
This proposal would impose a one-time tax on new cars and light
trucks based on the level of harmful emissions from each automobile.
The EPA would determine the tail-pipe emissions for each new model
light-duty vehicle and the tax would be based on these emissions rates.
The tax would be collected from the purchaser by the auto dealer at the
point of sale. (Source: Reducing the Deficit: Spending and Revenue
Options, March 1994, Congressional Budget Office)
PROHIBIT PEOPLE WITH ANNUAL ADJUSTED GROSS INCOMES OF OVER $100,000 FROM
$300 MILLION
RECEIVING FARM PRICE SUPPORT PAYMENTS
Current law limits participants in crop price support payments to no more
than $100,000 in deficiency payment benefits from the Commodity Credit
Corporation during any crop year. This option would prohibit those
people with annual incomes of $100,000 or more from receiving farm
price support payments. (Source: Reducing the Deficit: Spending and
Revenue Options, March 1994, Congressional Budget Office)
MEANS TEST UNEMPLOYMENT COMPENSATION, AT TAXABLE INCOME EXCEEDING
$361 MILLION
$120,000
This proposal would end the federal portion of unemployment subsidies
to any individual who has an after-tax income of over $120,000. (Source:
Kerrey/Brown Senate budget-cutting package)
For every $15 billion in increased revenues or reduced federal spending,
comprehensive health care coverage can be provided to approximately 1 million
people for five years.
REFORM PRISON CONSTRUCTION
$580 MILLION
This option would require that previously appropriated funds for prison
construction be spent before new amounts could be appropriated. (Source:
1993 House GOP Budget)
HALT NEW ACQUISITIONS OF CRUDE OIL FOR THE STRATEGIC PETROLEUM RESERVE
$325 MILLION
(SPR) FOR FIVE YEARS
The SPR, a government-owned crude oil inventory stored in Louisiana
and Texas, was authorized in 1975 to reduce the vulnerability of the U.S.
to interruptions in oil supplies. This option would halt new purchases of
crude oil for the SPR. (Source: Reducing the Deficit: Spending and
Revenue Options, March 1994, Congressional Budget Office)
ELIMINATE FUNDING FOR THE MAGNETIC LEVITATION (MAGLEV) PROTOTYPE
$700 MILLION
DEVELOPMENT
The MagLev is a high-speed rail prototype development program
established by the 1991 highway bill. The Office of Technology
Assessment states that the technology is not yet ready to jump to the full-
scale operating demonstration as proposed in the highway bill. (Source:
Penny/Kasich budget package)
REDUCE TRAVEL ACCOUNTS BY 15 PERCENT FOR SPECIFIC EXECUTIVE BRANCH
$875 MILLION
AGENCIES AND THE LEGISLATIVE BRANCH
The proposal exempts selected agencies because of special requirements
of their functions that necessitate the use of their full travel budget
allowances. The agencies exempted are the Department of Defense, the
Department of Veterans Affairs, the Department of the Treasury (which
includes the FBI), and the Department of Justice. (Source:
Kerrey/Brown Senate budget package)
ELIMINATE THE MARKET PROMOTION PROGRAM (MPP), WHICH ASSISTS U.S.
$500 MILLION
AGRICULTURAL EXPORTERS IN SELLING THEIR PRODUCTS OVERSEAS
The MPP was authorized by the 1990 farm bill to help U.S. agricultural
exporters sell their products overseas. This option eliminates the MPP.
(Source: Reducing the Deficit: Spending and Revenue Options, March
1994, Congressional Budget Office)
For every $15 billion in increased revenues or reduced federal spending,
comprehensive health care coverage can be provided to approximately 1 million
people for five years.
IMPOSE A 5-YEAR MORATORIUM ON LAND ACQUISITION BY THE FEDERAL GOVERNMENT
$1.4 BILLION
This option would impose a five-year moratorium on the purchase of land
by the federal government. The federal government already owns one-
third of the nation's land. (Source: The Zero Deficit Plan: A Plan for
Eliminating the Federal Budget Deficit by the year 2000, September 1993,
The Concord Coalition)
REDUCE FUNDS FOR THE STRATEGIC DEFENSE INITIATIVE (SDI OR "STAR WARS")
$1.85 BILLION
This proposal would reduce the Star Wars budget by 16 percent. (Source:
Amendment to H.R. 3400, the Reinventing Government bill, offered by
Reps. Barney Frank (D-MA) and Chris Shays (R-CT), November 1993)
IMPOSE A MORATORIUM ON THE PURCHASE OF FEDERAL BUILDINGS
$2 BILLION
According to the National Performance Review report, "Over the next 5
years, the federal government is slated to spend more than $800 million
a year acquiring new federal office space and courthouses. Under current
conditions, however, those acquisitions don't make sense." (Source:
Creating a Government that Works Better and Costs Less, Report of the
National Performance Review, September 7, 1993)
ELIMINATE FUNDING FOR HIGHWAY DEMONSTRATION PROJECTS
$2.6 BILLION
Outside of the normal competitive bidding and selection process, the
Congress will earmark special highway demonstration projects through the
reauthorization of the highway bill or the annual appropriations process.
Often times, these demonstration projects cannot be justified by economic
criteria. (Source: Reducing the Deficit: Spending and Revenue Options,
March 1994, Congressional Budget Office)
SCALE BACK NUCLEAR WEAPONS PRODUCTION TO 3,500 WARHEADS
$2.7 BILLION
The end of the Cold War and recent developments in Eastern Europe, the
former Soviet Union, and elsewhere around the world, raise questions
about the proper nuclear arsenal of the United States. This proposal
would scale back the Department of Energy's weapons production to no
more than 3,500 warheads, the maximum number of strategic warheads
that can be deployed under the Strategic Arms Reduction Talks (START
II) Treaty. (Source: Reducing the Deficit: Spending and Revenue
Options, March 1994, Congressional Budget Office)
For every $15 billion in increased revenues or reduced federal spending,
comprehensive health care coverage can be provided to approximately 1 million
people for five years.
INCREASE BURDENSHARING BY ALLIED NATIONS HOSTING U.S. FORCES
$9.6 BILLION
Countries in which U.S. troops are stationed provide varying amounts of
support as the host nation. In 1991, for example, Japan signed a five-year
agreement with the U.S. that promises to contribute 75 percent of the total
cost of U.S. deployment in Japan, excluding the salaries of U.S. armed
forces and civilian personnel. As Congress recommended in the
conference report accompanying the 1993 and 1994 defense authorization
acts, other allied nations hosting major concentrations of U.S. forces, such
as Italy, Germany, the United Kingdom, and South Korea, should follow
the lead of Japan in assuming 75 percent of U.S. stationing costs
(excluding the salaries of U.S. personnel). (Source: Reducing the Deficit:
Spending and Revenue Options, March 1994, Congressional Budget
Office)
CANCEL THE AIR FORCE'S F-22 AIRCRAFT PROGRAM
$8.4 BILLION
The F-22 is being developed to replace the Air Force's current fighter
plane, the F-15. The Air Force plans to purchase 650 F-22 aircraft.
Given the changing nature of world events, some observers question
whether the F-22 fighter, the only prototype of which crashed in 1992, is
needed. (Source: Reducing the Deficit: Spending and Revenue Options,
March 1994, Congressional Budget Office)
CANCEL THE NASA SPACE STATION PROGRAM
$10.4 BILLION
Some observers question whether we can continue to affor the NASA
space station program. They call into question its scientific merits,
particularly in relation to other vital scientific projects. (Source:
Reducing the Deficit: Spending and Revenue Options, March 1994,
Congressional Budget Office)
REDUCE THE FEDERAL SUBSIDY TO FARMERS PARTICIPATING IN FEDERAL COMMODITY
$11.1 BILLION
PROGRAMS--THOSE WHO PRODUCE CORN AND OTHER FEED GRAINS, WHEAT, RICE,
AND COTTON--BY LOWERING TARGET PRICES BY 3 PERCENT PER YEAR
Farmers who participate in federal commodity programs receive a
deficiency payment, which is the primary form of direct government
subsidy to growers. The size of the deficiency payment is calculated in
part from the difference between the market price of a crop and a target
price set by law. This option would lower those target prices by 3 percent
per year from 1995 through 1999. (Source: Reducing the Deficit:
Spending and Revenue Options, March 1994, Congressional Budget
Office)
TOTAL
$393 BILLION
American Hospital Association
THE
FULL
Capitol Place, Building #3
50 F Street, N.W.
Suite 1100
Washington, D.C. 20001
Richard J. Pollack
Telephone 202.638-1100
Executive Vice President
FAX NO. 202.626-2345
Federal Relations
AHA
American Hospital Association
Capitol Place, Building #3
50 F Street, N.W., Suite 1100
April 28, 1994
Washington, D.C. 20001
Telephone 202.638.1100
The Honorable Dan Rostenkowski
U.S. House of Representatives
2111 Rayburn House Office Building
Washington D.C. 20515-1305
Dear Chairman Rostenkowski:
The American Hospital Association (AHA) recently released the findings of a study
conducted by a highly respected consulting firm, Lewin-VHI, which analyzed the impact
on hospitals of proposed Medicare payment reductions contained in the President's health
care reform proposal (and, by inference, the type of Medicare reductions found in most
other major health care reform plans). I thought you might be interested in some more
detailed information about the impact on hospitals in your district.
It is important to note that the Lewin-VHI findings do not pretend to predict the future
with any certainty--they are highly sensitive to underlying assumptions about future
growth in hospital costs. They are however, illustrative of the kinds of pressures that
hospitals face if Medicare spending reductions alone of this size are enacted.
The key findings indicate that by the year 2000, after six years of spending reductions,
nationwide Medicare could pay hospitals only 71 cents for every dollar of inpatient care
delivered to Medicare patients--thus making the Medicare program an even poorer payer
than today's Medicaid program.
While most hospitals and all states are affected, teaching hospitals, hospitals in large
urban and rural areas, and communities with hospitals serving a disproportionately large
number of low-income patients would be particularly hard hit.
The negative impact on hospitals of Medicare spending reductions is magnified when
combined with price control and spending cap proposals included in many of the reform
bills under consideration.
The Honorable Dan Rostenkowski
April 29, 1994
Page 2
Since the release of this study, several people have raised questions about its scope and
the fact that it looked only at Medicare spending reductions, not focusing on any other
aspects of health reform, including some proposals which would compensate hospitals for
the proposed Medicare shortfalls. We would like to take the opportunity to respond to
these questions.
First, the President's plan, and most others, do not include Medicare in reform. The
Medicare program remains separate, with only limited incentives for Medicare
beneficiaries to move into a reformed health care system--a system which could provide
more efficient and cost-effective care through the use of integrated delivery systems,
coordinating and providing care in a seamless manner. With Medicare thus kept in
isolation, it is logical to look at the effects of the spending reductions only on that
program and its beneficiaries.
Second, there is no guarantee that we will get comprehensive reform, but we fear that
with or without reform, Medicare spending reductions will be on the table.
But even if we look at this level of Medicare reductions as part of a comprehensive
reform package and not in isolation, we still believe that the numbers don't add up.
Enclosed is a chart which helps to illustrate the following points. We have compared the
situation in hospitals in your district today and in the year 2000, and we have assumed
there is universal access and coverage in place at that time.
Medicare today accounts for about 38 percent of the activities of hospitals
in your district. According to Lewin-VHI, in the year 2000 hospitals in
your state would be paid about 66 percent of cost for this portion of their
services.
Medicaid today accounts for about 18 percent of your hospitals' activities.
Let's assume that this proportion is reimbursed--for argument's sake--at the
unlikely level of 100 percent of cost by the year 2000.
Uncompensated care--which currently represents about 4 percent of your
hospitals' activities--would be significantly reduced if we in fact achieve
universal access and coverage. And let's assume it will also be reimbursed
in the year 2000 at 100 percent of cost...just for argument's sake. And this
argument would put aside the fact that there will always be some
uncompensated care given in hospitals, whether to illegal aliens, to the
homeless or to those who can't or won't pay the required copayments and deductibles.
The Honorable Dan Rostenkowski
April 29, 1994
Page 3
Private-paying patients account for about 40 percent of your hospitals'
activities. The possible increases, described above, in hospital payments
for the Medicaid and uninsured populations will be offset by lower
payments from privately insured patients. In the future, private-paying
patients will expect to pay less for their care, no longer paying for the cost
shift. The cost shift would be eliminated in most reform proposals through
market forces, ranging from more use of prudent purchasing techniques
such as pooling arrangements that create more leverage, to the development
of competing integrated delivery systems. Other proposals, however,
would impose arbitrary and stringent caps on overall health spending or
insurance premiums, meaning hospitals could no longer rely on the private
sector to cover government and other payment shortfalls.
Even under this admittedly rosy scenario, hospitals nationwide remain with about 40
percent of their activities reimbursed at about 71 cents on the dollar. And even if the
Lewin-VHI estimates are substantially off the mark, the numbers still do not add up.
We appreciate your taking the time to understand the impact of Medicare spending
reductions of this magnitude and spending caps on hospitals in your district and state.
Please feel free to call on us if we can provide further information.
Sincerely,
Dich Daerdys
Dick Davidson
President
Enclosure
THE MATH DOESN'T ADD UP:
ILLUSTRATIVE IMPACT OF
MEDICARE SPENDING REDUCTIONS AND HEALTH CARE REFORM
ON HOSPITALS' FINANCIAL STATUS
ILLINOIS - 5TH DISTRICT
TODAY.
2000...
% OF
% OF
% OF
HOSPITAL
COST
COST
ACTIVITY
COVERED
COVERED
(District)
(State)
(State)
MEDICARE
38
86
66....
MEDICAID
18
56
(100 ?)
UNCOMPENSATED CARE
4
41..
(100 ?)
PRIVATE PAY
40
137
(100 ?)
BOTTOM LINE:
Patient Care
at Risk
Prospective Payment Assessment Commission, "Medicare and the American
Health Care System; Report to the Congress, " June 1993, p. 136, 1991
data.
Consistent with Prospective Payment Assessment Commission methodology,
payments for uncompensated care are calculated by AHA and reflect
operating subsidies from state and local governments.
...
Illustrative calculations of the kinds of financial pressures faced by hospitals
in the year 2000 if Medicare spending reductions alone, of the size included
in the President's health care reform proposal, are enacted.
....
Medicare payment estimates based on Lewin-VHI analysis of impact of
Medicare spending reductions, excluding changes proposed to capital and
direct medical education, on hospitals' Prospective Payment System
inpatient operating margin. If payments to hospitals for outpatient care
remain as under current law, the total Medicare payment to cost ratio is
likely to be somewhat higher, but only by about 3 percentage points.
State
US Representatives
D Hospital Name
City
Address
Administrator
Beds
Adm
Days Births
Out
Fle
Visits
Illinois ROSTENKOWSKI DAN
5 BELMONT COMMUNITY HOSPITAL
CHICAGO
4058 WEST MELROSE STREET
CHRISTOPHERL BOYD, DIR
109
2917
34257
0
11238
310
Illinois ROSTENKOWSKI DAN
5 CHILDREN'S MEMORIAL HOSPITAL
CHICAGO
2300 CHILDREN'S PLAZA
JAN R JENNINGS, PRES
240
10365
70721
0
202034
2350
Illinois ROSTENKOWSKI DAN
5 COLUMBUS HOSPITAL
CHICAGO
2520 NORTH LAKEVIEW AVENUE
LEE DOMANICO, CEO
299
10683
72791
1436
75034
1269
Illinois ROSTENKOWSKI DAN
5 GRANT HOSPITAL OF CHICAGO
CHICAGO
550 WEST WEBSTER AVENUE
PETER 8 FINE, PRES
344 10633 79532 576 102510 1216
Illinois ROSTENKOWSKI DAN
5 ILLINOIS MASONIC MED CENTER
CHICAGO
836 WEST WELLINGTON AVENUE
GERALD w MUNGERSON, PRES
695
16708
206638
3108
304635
2668
Illinois ROSTENKOWSKI DAN
5 LINCOLN WEST HOSPITAL
CHICAGO
2544 WEST MONTROSE AVENUE
BARRY 8 SCHNEIDER, PRES
105
Illinois
ROSTENKOWSKI DAN
5 OURLADY OF RESURRECTION CTR
CHICAGO
5645 WEST ADDISON STREET
JOHN BULLIVAN, CEO
273
6219
73571
0
51604
669
Illinois
ROSTENKOWSKI DAN
5 RAVENSWOOD HOSP MEDICAL CENTER
CHICAGO
4560 NORTH WINCHESTER AVENUE JOHN E BLAIR, PRES
333
11409
93229
2279
142522
1484
Illinois ROSTENKOWSKI DAN
5 SWEDISH COVENANT HOSPITAL
CHICAGO
5145 NORTH CALIFORNIA AVENUE
EDWARD A CUOCI, PRES
265
10114
66072
1111
54659
Illinois ROSTENKOWSKI DAN
5 WESTLAKE COMMUNITY HOSPITAL
MELROSE PARK
1225 LAKE STREET
DAVID RHEY, EXECVP
250
8481
65780
827
59119
864
Illinois ROSTENKOWSKI DAN
5 GOTTLIEB MEMORIAL HOSPITAL
MELROSE PARK
701 WEST NORTH AVENUE
JOHN MORGAN, PRES
252 9184 55762 556 99128 959
American Hospital Association
AHA
Capitol Place, Building #3
50 F Street, N.W.
Suite 1100
Washington, D.C. 20001
Telephone 202.638-1100
FAX NO. 202.626-2345
April 28, 1994
The Honorable John D. Dingell
U.S. House of Representatives
2328 Rayburn House Office Building
Washington D.C. 20515-2216
Dear Chairman Dingell:
The American Hospital Association (AHA) recently released the findings of a study
conducted by a highly respected consulting firm, Lewin-VHI, which analyzed the impact
on hospitals of proposed Medicare payment reductions contained in the President's health
care reform proposal (and, by inference, the type of Medicare reductions found in most
other major health care reform plans). I thought you might be interested in some more
detailed information about the impact on hospitals in your district.
It is important to note that the Lewin-VHI findings do not pretend to predict the future
with any certainty--they are highly sensitive to underlying assumptions about future
growth in hospital costs. They are however, illustrative of the kinds of pressures that
hospitals face if Medicare spending reductions alone of this size are enacted.
The key findings indicate that by the year 2000, after six years of spending reductions,
nationwide Medicare could pay hospitals only 71 cents for every dollar of inpatient care
delivered to Medicare patients--thus making the Medicare program an even poorer payer
than today's Medicaid program.
While most hospitals and all states are affected, teaching hospitals, hospitals in large
urban and rural areas, and communities with hospitals serving a disproportionately large
number of low-income patients would be particularly hard hit.
The negative impact on hospitals of Medicare spending reductions is magnified when
combined with price control and spending cap proposals included in many of the reform
bills under consideration.
The Honorable John D. Dingell
April 29, 1994
Page 2
Since the release of this study, several people have raised questions about its scope and
the fact that it looked only at Medicare spending reductions, not focusing on any other
aspects of health reform, including some proposals which would compensate hospitals for
the proposed Medicare shortfalls. We would like to take the opportunity to respond to
these questions.
First, the President's plan, and most others, do not include Medicare in reform. The
Medicare program remains separate, with only limited incentives for Medicare
beneficiaries to move into a reformed health care system--a system which could provide
more efficient and cost-effective care through the use of integrated delivery systems,
coordinating and providing care in a seamless manner. With Medicare thus kept in
isolation, it is logical to look at the effects of the spending reductions only on that
program and its beneficiaries.
Second, there is no guarantee that we will get comprehensive reform, but we fear that
with or without reform, Medicare spending reductions will be on the table.
But even if we look at this level of Medicare reductions as part of a comprehensive
reform package and not in isolation, we still believe that the numbers don't add up.
Enclosed is a chart which helps to illustrate the following points. We have compared the
situation in hospitals in your district today and in the year 2000, and we have assumed
there is universal access and coverage in place at that time.
Medicare today accounts for about 45 percent of the activities of hospitals
in your district. According to Lewin-VHI, in the year 2000 hospitals in
your state would be paid about 73 percent of cost for this portion of their
services.
Medicaid today accounts for about 7 percent of your hospitals' activities.
Let's assume that this proportion is reimbursed--for argument's sake--at the
unlikely level of 100 percent of cost by the year 2000.
Uncompensated care--which currently represents about 4 percent of your
hospitals' activities--would be significantly reduced if we in fact achieve
universal access and coverage. And let's assume it will also be reimbursed
in the year 2000 at 100 percent of cost. just for argument's sake. And this
argument would put aside the fact that there will always be some
uncompensated care given in hospitals, whether to illegal aliens, to the
homeless or to those who can't or won't pay the required copayments and deductibles.
The Honorable John D. Dingell
April 29, 1994
Page 3
Private-paying patients account for about 44 percent of your hospitals'
activities. The possible increases, described above, in hospital payments
for the Medicaid and uninsured populations will be offset by lower
payments from privately insured patients. In the future, private-paying
patients will expect to pay less for their care, no longer paying for the cost
shift. The cost shift would be eliminated in most reform proposals through
market forces, ranging from more use of prudent purchasing techniques
such as pooling arrangements that create more leverage, to the development
of competing integrated delivery systems. Other proposals, however,
would impose arbitrary and stringent caps on overall health spending or
insurance premiums, meaning hospitals could no longer rely on the private
sector to cover government and other payment shortfalls.
Even under this admittedly rosy scenario, hospitals nationwide remain with about 40
percent of their activities reimbursed at about 71 cents on the dollar. And even if the
Lewin-VHI estimates are substantially off the mark, the numbers still do not add up.
We appreciate your taking the time to understand the impact of Medicare spending
reductions of this magnitude and spending caps on hospitals in your district and state.
Please feel free to call on us if we can provide further information.
Sincerely,
Dich Daerdys
Dick Davidson
President
Enclosure
Attachment
THE MATH DOESN'T ADD UP:
ILLUSTRATIVE IMPACT OF
MEDICARE SPENDING REDUCTIONS AND HEALTH CARE REFORM
ON HOSPITALS' FINANCIAL STATUS
MICHIGAN - 16TH DISTRICT
TODAY.
2000...
% OF
% OF
% OF
HOSPITAL
COST
COST
ACTIVITY
COVERED
COVERED
(District)
(State)
(State)
MEDICARE
45
90
73....
MEDICAID
7
85
(100 ?)
UNCOMPENSATED CARE
4
5..
(100 ?)
PRIVATE PAY
44
118
(100 ?)
BOTTOM LINE:
Patient Care
at Risk
Prospective Payment Assessment Commission, "Medicare and the American
Health Care System; Report to the Congress, " June 1993, p. 136, 1991
data.
Consistent with Prospective Payment Assessment Commission methodology,
payments for uncompensated care are calculated by AHA and reflect
operating subsidies from state and local governments.
...
Illustrative calculations of the kinds of financial pressures faced by hospitals
in the year 2000 if Medicare spending reductions alone, of the size included
in the President's health care reform proposal, are enacted.
....
Medicare payment estimates based on Lewin-VHI analysis of impact of
Medicare spending reductions, excluding changes proposed to capital and
direct medical education, on hospitals' Prospective Payment System
inpatient operating margin. If payments to hospitals for outpatient care
remain as under current law, the total Medicare payment to cost ratio is
likely to be somewhat higher, but only by about 3 percentage points.
State
U.S. Representatives
D Hospital Name
City
Address
Administrator
Beds
Adm
Days Births
Out
Fte
Visits
Michigan
DINGELL JOHN D.
16 OAKWOOD HOSPITAL
DEARBORN
18101 OAKWOOD BOULEVARD
GERALD D FITZGERALD, PRES
615
22783
166769
4262
194916
3302
Michigan
DINGELL JOHN D.
16 OAKWOOD DOWNRMER MEDICAL CTR
LINCOLN PARK
25750 WEST OUTER DRIVE
MINDY L RICHARDS, ADM
36
1393
7462
0
38750
198
Michigan
DINGELL JOHN D.
16 VENCOR HOSPITAL DETROIT
LINCOLN PARK
26400 WEST OUTER DRIVE
JOSEPH A GORDON, ADM
218
Michigan
DINGELL JOHN D.
16 MERCY MEMORIAL HOSPITAL
MONROE
718 NORTH MACOMB STREET
RICHARD S HILTZ, PRES
182
7824
45880
827
88459
818
Michigan
DINGELL JOHN D.
16 HERITAGE HOSPITAL
TAYLOR
10000 TELEGRAPH ROAD
JAY BRYAN, VP
229
7101
63673
0
43945
673
Michigan
DINGELL JOHN D.
16 SEAWAY HOSPITAL
TRENTON
5450 FORT STREET
ROBERT J CLARK, VP
158
2528
15221
112
46360
313
Michigan
DINGELL JOHN D.
16 RIVERSIDE OSTEOPATHIC HOSPITAL
TRENTON
150 TRUAX STREET
DENNIS A CHRISTEN, VP
185
4876
33156
883
126328
522
Michigan
DINGELL JOHN D.
16 WYANDOTTE HOSP & MEDICAL CTR
WYANDOTTE
2333 BIDDLE AVENUE
WILLIAM R ALVIN, PRES
359
11235
86999
1330
39297
1385