Washington Health Policy Week in Review Archive

Washington Health Policy Week in Review is a weekly newsletter that offers selected stories from the daily newsletter CQ HealthBeat.

  • July 15, 2013 Issue

A Health Law Change Dozens of House Democrats Back: Slowing Down DSH Cuts

By John Reichard, CQ HealthBeat Editor

July 11, 2013 -- Hospitals are stepping up their pleas to lawmakers to delay cuts in a type of payment that framers of the health law thought would become less necessary as more uninsured Americans get health coverage.

At issue are so-called "DSH payments." The term refers to Medicare and Medicaid payments to facilities that policy wonks call "disproportionate share hospitals."

Hospitals in that category collectively get billions of dollars each year. The money compensates them for treatment they give to patients that lack health coverage and are too poor to pay their medical bills.

Because coverage is not likely to expand as quickly as a result of the Supreme Court's 2012 health law ruling that states are not required to expand Medicaid eligibility, hospitals say the health law's schedule of DSH cuts needs to be scrapped and reworked.

The health law calls for Medicaid DSH payments to be reduced by a total of $18.1 billion through fiscal year 2020. Those cuts grow year by year, starting at $500 million in fiscal 2014. After that, the cuts are: $600,000 in fiscal 2015; $600 million in fiscal 2016; $1.8 billion in fiscal 2017; $5 billion in fiscal 2018; $5.6 billion in fiscal 2019; and $4 billion in fiscal 2020. Medicare DSH cuts total $22 billion over 10 years.

Last week's announcement by the Obama administration that the employer coverage mandate start date will be delayed from 2014 to 2015 casts further doubt over how fast coverage will expand, hospital lobbyists say.

They're urging lawmakers to pass a bill (HR 1920) introduced by Rep. John Lewis, D-Ga., that would delay Medicare DSH cuts by two years and eliminate the first two years of Medicaid DSH cuts.

Democrats Behind Proposal

In contrast to other proposals to modify the health law (PL 111-148, PL 111-152), this one is mainly supported by Democrats. Introduced on May 9, the House measure has 49 co-sponsors, 46 of them Democrats. So far Republicans have been largely unwilling to tinker with health law provisions for fear they would be seen as supporting any aspect of the overhaul.

"There has been good momentum with the bill," says American Hospital Association spokeswoman Alicia Mitchell. "Folks understand what the issue is."

Hospitals point to Congressional Budget Office (CBO) projections to buttress their argument that coverage is going to expand more slowly because many states are exercising their right under the Supreme Court ruling not to expand their Medicaid programs, at least not right away.

Following that ruling, "CBO has reduced its coverage estimate from 32 million to 25 million," the American Hospital Association said in a July 2 letter to Centers for Medicare and Medicaid Services (CMS) Administrator Marilyn Tavenner, referring to the Congressional Budget Office. "The two-year delay of DSH reductions proposed in HR 1920 would allow more time for health coverage expansions under the ACA [Affordable Care Act] to be more fully realized," the letter said.

"Already, health care coverage may fall short of projections by more than 7 million people due to state decisions against Medicaid expansion," said Brice Siegel, president of America's Essential Hospitals, the lobby that represents public safety net hospitals. Now that the employer mandate has been delayed and Republicans are trying to force a delay in the mandate that individuals obtain coverage starting in 2014, coverage expansion is in further doubt, he added. "Delaying mandates on employers and individuals would further erode coverage," he said in a July 10 statement.

Whether the employer mandate delay will slow down coverage expansion is debated, however. The Urban Institute has said coverage expansion won't be materially affected by the delay. And the White House issued a strong statement last week against the idea of delaying the individual mandate. Getting rid of the mandate would be tantamount to repealing the health law because it would make coverage unaffordable in insurance exchanges, the statement said. That suggests Democrats will hold fast against dropping or delaying the individual mandate.

But Beth Feldpush, senior vice president for advocacy at America's Essential Hospitals, said in an interview that although there is uncertainty over the impact on coverage of delaying the employer mandate, "uncertainty is not good for hospitals' plans to care for their patients." What is certain now, she said, are the DSH cuts and the lack of certainty about coverage gains. And that makes it difficult for hospitals to go ahead with plans to expand or renovate, she suggested.

Chip Kahn, president of the Federation of American Hospitals, said in an interview that his membership supports passage of the Lewis bill "and basically any effort to give some relief here, because under any measure it's unlikely that coverage is going to reach expectations immediately with the implementation of ACA."

The employer mandate also could mean "another increment that may not get covered," he said. "So we need help here because the load of uninsured hopefully will go down but I don't think it will reach expectations in the near term."

Getting Lewis' bill passed won't be easy, he acknowledged. "I think at this point if nothing else changes between now and the end of the year it would be a hard lift for any changes in ACA to actually be enacted. We know from observation that ACA is a Gordian Knot and there's such disagreement on it between Republicans and Democrats that consensus is hard to envision. But that doesn't mean that we will back off on the really important accommodations that we think need to be made."

One of the challenges is that postponing or shrinking the cuts might require offsetting spending cuts of several billion dollars elsewhere in the federal budget.

The Obama administration's fiscal 2014 budget proposal does provide for some relief. It calls for canceling the fiscal 2014 Medicaid DSH cut but recouping the savings by making heavier cuts in future fiscal years. But Kahn said "I think relief is self defeating if it's done in a zero sum game."


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