250 Billion Medicare Spending Cut?
With some basic data from the Wisconsin Hospital Association, we've completed an analysis of the projected impact on RWHC hospitals if Medicare spending is reduced by $250 billion. Today, Medicare pays rural hospitals in the Cooperative only 88% of costs. With the proposed cuts, Medicare will only pay 75% of costs. Our relatively small rural network will lose an additional $42 million dollars from 1996 through the year 2000 in hospital services alone.
These figures do not include the effect of the reduction on associated rural physician or nursing home services. In addition, it must be emphasized that a disproportionate share of the patients seen by rural providers are Medicare enrollees makes them particularly vulnerable to Medicare further reducing its share of costs paid.
RWHC has long fought against the lower payment rates of rural providers compared to urban based institutions. It is now more critical than ever to note that combining lower rural reimbursement rates along with the historically lower utilization by rural Medicare enrollees translate into even lower Medicare payments on behalf of each Medicare enrollee. This is particularly significant as the trend towards expanding the use of HMO, PPO and POS finance-delivery models may further worsen the historically lower Medicare program payments for rural enrollees.
Note For Medicare Finance Nerds
Skip this if you are not interested in Medicare payment formulas or if you become easily depressed.
We all know that the issue with Medicare is not whether the rate of growth in the Medicare program will be slowed (the $250 "cut") but by how much and through what mechanism. Many Medicare patients and hospital administrators may prefer addressing Medicare cuts through slower wage growth rather than fewer nurses at the bedside. But the current proposals to reduce future Medicare spending encourages just the opposite national responsecutting staff rather than slowing wage growth.
Assume all hospitals freeze wages in 1996 to the 1995 level. Since the 1996 Medicare reimbursement is built on a formula that assumed some level of wage inflation over 1995, the wage freeze would generate some real savings in 1995.
The problem begins in 1997 when Medicare payments would take into account the prior year' national suppression of wages due to the industry wide pay freeze. The Medicare formula would be "rebased," i.e. the hospital market basket used to account for inflation of input costs would be adjusted to take into account the industry's new and relatively lower wage rates for 1996 and beyond.
Nationally, any reduction in the annual market basket of input costs faced by hospitals merely causes a rebasing of projected Medicare expenditures and does not "count" toward the $250 billion in sought after savings. (Savings are being defined as the difference between the projected baseline and actual program expenditures.) This problem can be limited if acknowledged and taken into account when the specific Medicare bill is drafted.
This problem was brought to my attention by Hal Cohen, a member of the National Advisory Committee on Rural Health and Chair of our Health Care Financing Work Group.
Other Impact Of Budget Resolutions
Beyond Medicare, the FY 1996 House and Senate Budget Resolutions severely impacts on rural health. You may have seen these numbers before but they are worth seeing again and thinking about. They are the major source of development and the safety net dollars for health care services in rural and urban underserved communities:
Targeted Rural Health Programs
House: 100% reduction -$44 M
Senate 42% reduction -$18 M
Health Professions Education
House: 100% reduction -$290 M
Senate 42% reduction -$122 M
National Health Services Corps
House: 50% reduction -$63 M
Senate 42% reduction -$53 M
Maternal & Child Health Block Grant
House: 50% reduction -$342 M
Senate 42% reduction -$287 M
Community/Migrant Health Centers
House: 0% reduction -$0 M
Senate 42% reduction -$320 M
Since the above resolutions passed, the Rural Health Care Coalition, co-chaired by Wisconsin's Representative Steve Gunderson, is recommending "responsible deficit reduction" to the Labor-HHS-Education Subcommittee through FY96 appropriations. that "balances the need for deficit reduction with the need to provide quality health care in rural areas."
Federal Office of Rural Health Policy
FY95 Appropriation $13.2 million
FY96 RHCC Recommendation $10.2 million
Rural Health Transition Grants
FY95 Appropriation $17.6 million
FY96 RHCC Recommendation $10.6 million
Rural Health Outreach Grants
FY95 Appropriation $27.0 million
FY96 RHCC Recommendation $30.0 million
Rural Telemedicine Grants
FY95 Appropriation $8.7 million
FY96 RHCC Recommendation $10.7 million
Essential Access Community Hospitals
FY95 Appropriation $3.5 million
FY96 RHCC Recommendation $3.5 million
In addition, the Coalition strongly recommended maintaining FY95 funding for Area Health Education Centers, Border Health Centers, Migrant Health Centers, Community Health centers and Family Medicine Training.
Win or lose, once again we owe a deep debt of gratitude to Steve Gunderson for his advocacy on behalf of rural health. Please make the opportunity to communicate your appreciation.
Suggestions To Donna Shalala
The National Advisory Committee on Rural Health (advisory to Secretary Donna Shalala) met in Maine this month and we developed recommendations regarding the upcoming Medicare and Medicaid program cuts being discussed in Congress.
"Prior to Congressional enactment of the FY 1996 budget reconciliation, the Secretary should analyze the rural impact, by state, of the Appropriations Committees' proposals for cutting the projected expenditures in the Medicare and Medicaid programs. Moreover, impact analyses are needed to assess the combined effects of reduced expenditures in the two programs and changes in the private health care insurance sector."
"Improvements will have to be made in the way Medicare pays HMO's so that the payment more accurately reflects the costs of providing managed care to rural residents." Specifically, the Committee endorsed the recent recommendation of the federal Physician Payment Review Commission's recommendation to establish a new competitive bidding process (low bid sets government share) for setting Medicare payments to HMOs and to substantially change the current HMO system (based on adjusted average per capita costs) where multiple HMOs are not available.
RWHC Supports Insurance Reform
The Cooperative Board reviewed health insurance reform bills recently introduced by Senator Peggy Rosenzweig and Representative Gregg Underheim and passed a resolution strongly supporting the health insurance reform concepts embodied in AB 416 and SB 201.
They are discussing good, solid market based reforms that are almost universally recognized as long over due. Personally, as the executive of a relatively small business and the father of a child with several serious chronic health problems, this is one issue I know first hand.
We assume that some will oppose modified community rating. This is short sighted. Maximizing our health while minimizing our expenditures absolutely requires long term individual and community responsibility. You need both. Modified community rating with the other insurance reforms strikes a reasonable balance.
Court Ruling Adds A Reform Option
A recent ruling by the U.S. Supreme Court may have a significant positive impact on the ability of states to implement health reform beyond the current generation of small market insurance reforms being considered. Commercial insurers and HMO's challenged a New York State tax on hospitals saying that such surcharges were superseded by the federal Employee Retirement Income Security Act, known as ERISA.
Before this case, ERISA had been considered a practically absolute barrier protecting self-insured health plans from state taxes on provider services. Such approaches had been widely considered as a mechanism to equitably collect funds to finance health care for the working poor. The following is an excerpt from the April 27th Wall Street Journal:
"Justice David Souter, writing for the unanimous Supreme Court, reassured states that ERISA isn't as formidable as they feared. The thrust of the decision is that ERISA doesn't necessarily preclude state revenue-raising or regulation that has only an indirect economic influence' on employee benefit plans.'"
"It's an extremely important decision for states' that want to try new ways to finance health care for the poor, said Kenneth Raske, president of the Greater New York Hospital Association."
Wisconsin Flunks Risk Assessment
At our last Rural Health Development Council meeting we received a report about how well Wisconsin compares to other states on key community health issues. We don't.
Please note: This type of data is several years old but represents that most recently available. Data is for the adult population. Being ranked 1st is not good, being 50th is good:
1st Drinking & Driving
1st Binge Drinking
4th Alcohol Consumption
(gallons of 100% absolute alcohol)
6th High Blood Pressure (Men)
Community Care Network Demo
I just concluded my work as a reviewer for The National Community Care Network Demonstration Program. As you may remember this is a collaborative effort of AHA, CHA and VHA supported by the W.K. Kellogg Foundation.
If the proposals that I saw are any indication, the concept of community care networks is beginning to be taken very seriously by many rural communities; the approach has four dimensions:
"The goal is for networks to strengthen accountability to patients and the public."
Community Health Focus
"In addition to providing health services to enrolled populations, networks will be committed to improving the health status of a given community."
Seamless Continuum Of Care
"Networks make the system more user-friendly by truly managing care and by providing "Networks will make the system more user-friendly by truly managing care and by providing consistent and coordinated access to services across care settings."
Management Within Fixed Resources
"Risk-adjusted capitated payments or global budgets to networks are used to encourage providers within the network to avoid unnecessary duplication of facilities and services and conserve health care resources."
Wisconsin On World Wide Web
In what will likely be the first of a long line of Wisconsin based health care home pages for your World Wide Web address book:
Catholic Health Association of Wisconsin:
Primary Care Consortium in Wisconsin:
Work Force Planning
The Work Force Forum (a diverse work group of about twenty people funded in part by RWHC through the Consortium for Primary care in Wisconsin) had its first meeting this month. Provider representatives ranged from Aurora Health Care, Dean Medical Center and the Marshfield Clinic to Sauk County Public Health and RWHC. "On the other side of the table" were representatives of multiple medical, nursing and PA schools and programs.
On a related theme, the new Wisconsin Network for Health Policy Research just released its third 1995 study, Key State Issues Related To Nurse Practitioners, Certified Nurse Midwives And Physician Assistants In Wisconsin. A finding "with significant policy implications is that while the supply of these providers is growing, there continues to be a strong demand for additional NPs, CNMs and PAs in many practice settings in the state." Copies may be obtained by calling the Network office at 608-263-6294.
Medical School Search Nears End
The gestation period for a new UW medical school dean is longer than that for we humans but is now finally coming to an end. The Committee is in the process of interviewing seven finalists and will meet with Chancellor Ward on July 6th to present our recommendations.
Contrary to earlier speculation, the Search Committee has been able to attract outstanding candidates, each combining strong academic and community leadership.
I'm Out Of Here
Instead of writing next month's Report, I'll be backpacking with family, without PowerBook, the last two weeks of July. This year we will be dodging bogs in Dartmoor, England, the setting for Sherlock Holmes' Hound of the Baskervilles.