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Presidents budget requests deep Medicare cuts

March 7, 2014

The AHA this week strongly criticized President Obama’s fiscal year (FY) 2015 budget request for cutting Medicare spending by $407 billion. The budget for the fiscal year beginning in October proposes a $354 billion Medicare cut to providers and $7.3 billion in reductions to Medicaid.

“Today’s budget proposal includes some problematic policies that would undermine the ability of hospitals to improve the health care system and, ultimately, puts access to services at risk for the patients and communities we serve,” said AHA President and CEO Rich Umbdenstock.

The March 4 budget proposal would reduce bad debt payments to providers, including hospitals, by $30.8 billion; Medicare graduate medical education (GME) payments by $14.6 billion; and critical access hospital payments from 101% to 100% of reasonable costs, among other cuts.

While the president’s overall budget request for FY 2015 is not expected to get much traction on Capitol Hill, the proposed hospital cuts could be legislative fodder for lawmakers looking for ways to offset the cost of improving Medicare payments to physicians when the current "doc fix" expires on March 31.

Physicians face a 24% reimbursement cut on April 1 unless Congress acts to replace Medicare’s Sustainable Growth Rate (SGR) formula or adopt another temporary fix. The Congressional Budget Office last week estimated it would cost $138 billion over 11 years to repeal and replace the physician payment formula.

Congress in December approved a three-month physician payment patch, along with several Medicare payment provisions that support small and rural hospitals. Hospital leaders this week urged Congress to avoid cutting hospital services for patient care as a way of paying for the next physician payment fix (see story on page 1).

AHA members March 4 received a Special Bulletin with details on the budget request details. For more, click on:

http://tinyurl.com/luc5cqz.

Other hospital-related programs.

Under the president’s budget proposal, Children’s Hospitals Graduate Medical Education (GME) funding would be eliminated, down from its current level of $265 million; however, it would receive $100 million funded by Medicare GME cuts.

Other provisions include $4 million to fund a new Rural Physician Training grant program; $17 million for the 340B drug pricing program to help improve the program’s operations and oversight; $57 million for Rural Health Outreach grants; $26 million for Rural Hospital Flexibility grants, a reduction of $14 million from FY 2014 funding; and $14 million to support the Health Resources and Services Administration’s efforts to expand health technology systems. In addition, it would provide $255 million for the Hospital Preparedness Program, the same amount as FY 2014, and $144 million to develop nursing workforce programs.

For more details, click on: http://tinyurl.com/k3x2vr9.

The AHA's Umbdenstock said the president’s budget blueprint “fails to appreciate the changes hospitals are now implementing" ? a point buttressed by a report released the same day as the president's budget. The report said Medicare could save an additional $900 billion over the next 10 years due to structural changes throughout the health care sector that are driving spending down. The report was prepared by health care economics consulting firm Dobson¦DaVanzo, and released by the Federation of American Hospitals.

The report said structural changes driving the spending slowdown include a shift to valuebased payments and declines in hospital readmission rates and healthcare-associated infections, among other trends. For more, click on: http://tinyurl.com/kh7uhyx.