Portions of the reduction in federal spending to help finance healthcare reform would be phased in after insurance coverage expansions start, under the terms of an agreement with three major hospital industry groups announced by Vice President Joe Biden on Wednesday. According to the American Hospital Association, the agreement on reductions to be made over a 10-year period includes the following components:
- Reduced Medicare update factors in the form of market-basket cuts averaging market-basket minus 1.0 percent over the next 10 years. Cuts would be smaller at first, with a trigger attached to coverage expansions.
- Disproportionate share hospital payment reductions that would be phased in starting in 2015 and would be linked to coverage expansions. After 10 years, approximately 60 percent of total DSH payments would be preserved.
- Reductions in payment for hospital readmissions, focusing on cases deemed to be avoidable and related to the initial admission
Various system reforms are also reportedly included in the package, according to AHA:
- Value-based purchasing provisions that are described as budget-neutral
- Bundling undertaken on a pilot project basis with a specified end to the project and an evaluation
- Restrictions on physician self-referral to hospitals in which they have an ownership interest and limits placed on expansion for those that are grandfathered
- Increased number of Medicare-approved slots for physician graduate medical education
- Administrative simplification
- Other provisions related to extending expiring provisions, adjusting physician payments, supporting prevention and wellness, and establishing accountable care organizations
The community benefit standard for hospital tax exemption would be maintained, with no formulas or tests on the amount of charity care provided.
As coverage expands and more Americans are insured, the American Hospital Association estimates that hospitals would see reduced uncompensated care of at least $171 billion over 10 years.
