Teaching Hospitals' Balanced
Budget Act Relief Agenda
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Related Resources
AAMC Documents
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Current Status as of August 16, 1999
A number of complex factors have led to the financial crisis
currently confronting many of America's teaching hospitals.
One of the most immediate sources of fiscal pain is the Balanced
Budget Act of 1997 and the Medicare-related payment cuts it
mandates. The Association of American Medical Colleges calls
on members of Congress to undertake the following legislative
actions.
Medicare Indirect Medical Education (IME) Payments
Halt implementation of further IME cuts. Members of
Congress are urged to cosponsor "The Graduate Medical
Education Payment Restoration Act of 1999" (S. 1023/H.R.
1785), introduced by Sen. Daniel Patrick Moynihan (D-N.Y.)
and Rep. Charles Rangel (D-N.Y.). The bill freezes the BBA's
reductions in Medicare IME payments at the current level of
6.5 percent.
Indirect Medical Education (IME) payments compensate teaching
hospitals for the added cost of medical education programs,
for the higher costs they incur in treating the most severely
ill patients, and for sustaining an environment that fosters
research. The BBA reduces Medicare's IME payments by 28.57
percent over a four-year period, from 7.7 percent in FY 1997
to 5.5 percent in FY 2001.
Medicare Disproportionate Share Hospital (DSH) Payments
Halt implementation of further Medicare DSH cuts.
Retain DSH funding at FY 1999 levels.
Disproportionate share hospital (DSH) payments compensate
hospitals for the higher operating costs they incur in treating
a large share of low-income patients and, more broadly, in
preserving access to care for Medicare and uninsured populations
by financially assisting the hospitals they use. The BBA reduces
Medicare's DSH payments by five percent over five years. Thus
far, a two percent reduction has been implemented.
Direct and Indirect Medical Education Payments Associated
with Medicare Managed Care Enrollees
Pay teaching hospitals one hundred percent of Graduate
Medical Education (GME) payments associated with Medicare
managed care enrollees beginning in FY 2000.
The BBA gradually phases in payment of both direct graduate
medical education (DGME) and IME payments to teaching hospitals
when they care for Medicare+ Choice (Medicare managed care)
enrollees. The phase-in schedule for these payments over five
years pays teaching hospitals amounts equal to 20 percent
in 1998, 40 percent in 1999, 60 percent in 2000, 80 percent
in 2001, and 100 percent in 2002. Only after five years will
teaching hospitals be fully compensated for care they currently
provide to Medicare+ Choice enrollees.
DSH Payments Associated with Medicare Managed Care Enrollees
Pay one hundred percent of DSH payments associated with
Medicare managed care enrollees directly to eligible hospitals
beginning in FY 2000.
While the BBA gradually pays DGME and IME payments to eligible
teaching hospitals when they care for Medicare+ Choice enrollees,
DSH payments remain embedded in Medicare managed care rates
and will not be paid directly to hospitals which incur the
additional burdens of providing this care.
Members of Congress are urged to cosponsor H.R. 1103/S. 1024,
introduced by Rep. Charles Rangel (D-N.Y.) and Senator Daniel
Patrick Moynihan (D-N.Y.), which would pay DSH payments associated
with Medicare managed care enrollees directly to eligible
hospitals beginning in 2000 (House bill) and 2001 (Senate
bill).
Medicare Outpatient Prospective Payment System (PPS)
Reform the proposed Medicare outpatient PPS by:
- eliminating the 5.7 percent overall reduction due to the
beneficiary co-insurance calculation;
- establishing a payment floor to limit losses for hospitals
that incur large payment reductions under the new PPS, as
proposed in H.R. 2241/S.1263, "The Hospital Outpatient
Preservation Act," sponsored by Rep. Mark Foley (R-Fla.)
and Sen. James Jeffords (R-Vt.); and
- addressing other associated regulatory and policy changes,
such as establishing outpatient IME and DSH adjustments.
The BBA creates a prospective payment system for hospital-based
outpatient operating and capital costs related to health care
services. Under the new system, to be implemented sometime
in 2000, payments to major teaching hospitals are expected
to decrease by 10.6 percent (according to HCFA estimates).
Contacts
Lynne Davis Boyle, Assistant Vice President
AAMC Government Relations
ldavisboyle@aamc.org
(202) 828-0526
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