MYTH #1: In negotiations over reform, hospitals were forced to accept sharp cuts in Medicare funding.
FACT: In those negotiations, hospitals come out winners. They “were inside the tent very early on, negotiated a decrease in their Medicare updates that they figured out was acceptable” the Urban Institute’s Bob Berenson explained in a recent Health Affairs roundtable. (Berenson is in good position to analyze the changes: he was in charge of Medicare payment policy and managed care contracting at the Health Care Financing Administration – now called the Centers for Medicare and Medicaid– from 1998 to 2000 )
“And now [hospitals] are off limits until 2020 from the new board that is supposed to [make sure] Medicare hits spending targets,” Berenson added referring to the Independent Payment Advisory Board (IPAB) that will recommend ways to trim Medicare spending if it continues to grow faster than the Consumer Price Index. IPAB begins its work in 2014, but hospitals and hospices are exempt from IPAB”s proposals until 2020.
Moreover, while annual increases in Medicare payments to hospitals will be trimmed slightly, these cuts will be offset by the fact that hospitals will be seeing an influx of paying patients. Beginning in 2014, millions of formerly uninsured patients will no longer need charity care. Granted, the “Disproportionate Share Funding” (DSH) that many hospitals now receive to help defray the expense of caring for a disproportionate share of poor patients will be sliced by 75%, but a portion of the 75% cut will then be distributed back to hospitals, based on how much uncompensated care a particular hospital is still providing.Continue reading…
