Hospital Lobbying Against Medicare Cuts Intensifies

Dive Brief:

  • * Hospital groups are kicking their lobbying up a notch as 2022 approaches, looking to fend off scheduled cuts to Medicare’s provider pay.
  • * Major hospital lobbies sent a letter on Monday to congressional leaders urging them to extend the moratorium on Medicare sequester cuts, and prevent the pay-as-you-go sequester from taking effect. A hospital interest group called the Coalition to Protect America’s Health Care has even launched an ad campaign urging Congress to prevent the cuts.
  • * The provider groups are contending they continue to face financial challenges as the pandemic stretches on, despite most major U.S. health systems reporting healthy revenue and profits in 2021 so far.

Dive Insight:

The letter, sent to top congressional leadership and signed by the American Hospital Association, Federation of American Hospitals and America’s Essential Hospitals, among other provider interests, flagged two areas of concern: Medicare sequester cuts and the pay-as-you-go sequester.

It’s the latest move by hospital interests to prevent the 4% pay-go cut, which is due to the American Rescue Plan passed in March, which will overlap with the expiration of a current pause on the 2% Medicare sequester, stemming from the Budget Control Act of 2011.

Pay-go mandates that new legislation not increase the deficit. If it does, automatic spending reductions kick in, unless they’re waived by Congress.

The pay-go cuts, if they go through, will result in an estimated loss of $36 billion in Medicare spending in 2022 alone, according to the Congressional Budget Office. In the letter sent Monday, the hospital groups said they estimate payments to providers in fee-for-service Medicare next year (which tend to total about a fourth of Medicare spending) would fall by $9.4 billion if pay-go progresses as planned.

If lawmakers allow the cuts to go into effect, it will mark the first time that Congress has not waived the pay-go sequester.

Hospital groups are also raising the alarm about the moratorium on Medicare sequester cuts. Currently, Congress’ freeze on a 2% cut to all Medicare payments is scheduled to expire at the end of the year. If not delayed further, health systems and hospitals in FFS Medicare will lose an estimated $4.7 billion, according to the letter.

The groups, which asked Congress to move on the issues by year’s end, are citing COVID-19 as the reason for needing additional relief, along with fiscal challenges like higher workforce and staffing costs, higher spending on drugs and supplies to cope with outbreaks and treating more medically complex patients, which all threaten the return to regular operations.

“Additional Medicare reductions to providers are not sustainable and put our members’ ability to care for their patients at risk,” the groups wrote.

However, federal subsidies last year offset the worst of COVID-19’s financial effects on hospitals, research has shown. And for-profit systems like Tenet and HCA reported strong revenue and profit growth in the third quarter of the year, even as costs rose amid delta headwinds.

It’s unclear if Congress will act on the requests, as it’s politically savvy to avert cuts to the Medicare program, which covers some 64 million Americans, the majority of which are seniors. However, the need to curb costs in Medicare is increasingly important as the program runs dangerously low on funds.

Though lawmakers to date have not allowed Medicare’s trust fund to become depleted, policymakers expect the pot that funds the Part A hospital benefit to become insolvent by 2026 without legislative action, as program spending continues to balloon. Spending is only projected to grow from its current level of 4% of the gross domestic product before leveling off at 6.5% in just a few decades, according to a recent report from the Medicare Board of Trustees.

That outlook could be significantly higher if cost reduction measures (like the pay-go cuts) are scaled back, trustees said. If that’s the case, Medicare spend could get as high as 8.5% of the GDP by 2095, straining the U.S. economy and the federal budget and threatening access to coverage.


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