March 11—Hospital impacts in the Trump administration’s proposed FY20 budget include cuts to Medicare uncompensated care, more site-neutral payments, and an extension of coming Medicaid payment cuts.
The administration’s proposed budget for the U.S. Department of Health and Human Services (HHS) includes $87.1 billion in discretionary spending and $1.2 trillion for mandatory programs, like Medicare and Medicaid. Although the proposed budget is only a starting point for congressional budget negotiations, many policies eventually implemented by Congress were first proposed in presidential budgets.
Among the Trump administration’s Medicare proposals, a new process would be implemented in FY21 to distribute uncompensated-care payments to hospitals based on their share of charity care and non-Medicare bad debt as reported on Medicare cost reports. The payments would begin at FY19 funding levels but would limit annual growth to the increase in the Consumer Price Index for All Urban Consumers. That step would provide $98 billion in net savings to the federal government over 10 years.
Hospitals provided $38.4 billion in uncompensated care in 2017—down from a peak of $46.8 billion in 2013, according to a report by the American Hospital Association (AHA).
Other Medicare cuts for hospitals would be generated from the adoption of site-neutral payments for on-campus hospital outpatient departments for some physician-office services, such as clinic visits. That would save the federal government $131.4 billion over 10 years.
Another proposal would pay all off-campus hospital outpatient departments under the Physician Fee Schedule starting in 2020. That is projected to provide $28.7 billion in 10-year federal savings.
A separate cut would reduce Medicare payment of bad debt from 65 percent to 25 percent over three years, except for exempted rural hospitals with fewer than 50 beds, critical access hospitals, rural health clinics, and federally qualified health centers. Ten-year savings of $38.5 billion are expected from that proposal.
The proposed cuts to Medicare, which came amid new bills urging an expansion of Medicare to all U.S. residents, were highlighted by hospital advocates.
“The new White House budget imposes arbitrary and blunt Medicare cuts to hospitals who care for the nation’s most vulnerable,” Chip Kahn, president and CEO of the Federation of American Hospitals, said in a written statement. “The impact on care for seniors would be devastating. Not to mention that massive reductions would drastically reduce resources critical to care for low-income Americans and cripple efforts to stave off the looming physician shortage.”
Hospitals were paid only 87 cents for every dollar they spent caring for Medicare patients in 2017, according to another AHA tracking report. In 2017, 66 percent of hospitals received Medicare payments that amounted to less than the cost of that care.
“Hospitals are less and less able to cover the cost of care for Medicare patients; it is no time to gut Medicare,” Kahn said.
The highest-profile Medicaid component of the administration’s budget was the inclusion of payment changes included in the 2017 Graham-Cassidy-Heller-Johnson legislation to repeal and replace the Affordable Care Act (ACA). That legislation, which was narrowly defeated in the Senate, would allow states to choose between a Medicaid per-capita cap or a block grant or end the ACA’s Medicaid eligibility expansion. The measure was projected to reduce future Medicaid spending by $1.4 trillion over 10 years.
The budget also would require “able-bodied, working-age individuals” to find employment, train for work, or volunteer in order to qualify for Medicaid. The provision was expected to garner $130.4 billion in savings over 10 years.
The budget would increase the statutory limit on Medicaid copayments for nonemergency use of emergency departments if state ask for the authority to increase the limit. The change is projected to provide $1.6 billion in federal savings over 10 years.
The ACA required cuts to Medicaid Disproportionate Share Hospital payments, and Congress subsequently pushed back those cuts to begin in FY20 and run through FY25. The new budget would extend those cuts through FY29 to obtain an additional $26 billion in savings.
States would be allowed to more frequently check the eligibility of their Medicaid enrollees under another provision, which is expected to garner $45.6 billion in savings over 10 years.
The budget would establish a user fee under the 340B discount drug program, set at 0.1 percent of total 340B drug purchases by a participating covered entity. The new fee would provide $19 million of the $29 million budgeted for regulatory oversight of the program.
The administration proposed changing the way savings are used after a 2018 regulation cut hospital outpatient payments for 340B drugs from average sales price (ASP) plus 6 percent to ASP minus 22.5 percent. The resulting savings were redistributed across Medicare payments to outpatient hospitals. The proposed budget would distribute the savings to hospitals based on the percentage of all uncompensated care they provide compared with other outpatient hospitals.
Another proposal would require all 340B participants to report the savings they generated from the program and how they used their savings.
More Medicare Provisions
The budget would create—beginning in FY21—a risk-adjusted monthly Medicare “priority care payment” for primary care providers billing for evaluation and management (E/M) services. It would be funded by a 5 percent annual cut to non-E/M services and procedures.
Starting in 2020, Medicare may align beneficiaries to accountable care organizations based on services delivered by non-physician primary care providers . That change is projected to provide $80 million in savings over 10 years.
The budget also called for the creation of a consolidated hospital quality payment in Medicare that would combine the Inpatient Quality Reporting Programs, the Hospital Value-Based Purchasing Program, the Hospital-Acquired Condition Reduction Program, and the Hospital Readmissions Reduction Program.
A new value-based purchasing program would be created for outpatient hospitals and ambulatory surgical centers and would link 2 percent of payments to performance on quality and outcome measures.
Another provision would risk-adjust payments to outpatient hospitals and ambulatory surgical centers.
Medicare patients with high-deductible plans would be allowed to make tax-deductible contributions to health savings accounts or medical savings accounts. The proposal is expected to increase Medicare costs by $240 million over 10 years.
Key Physician Stipulations
Beginning in 2021, the budget would create a new exception to the Stark physician self-referral law for arrangements that arise from participation in advanced alternative payment models (APMs).
Medicare’s “arbitrary thresholds” for physicians to to garner a 5 percent bonus on Medicare payments based on their APM participation would be eliminated under another proposal, which is expected to generate $280 million in savings over 10 years.
The budget would alter Medicare’s primary physician payment system, the Merit-based Incentive Payment System, in 2022 to assess performance at the group-practice level instead of the individual-clinician level. It would retain the $500 million available for additional annual bonus payments for top performers.