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Cover More People Or Shrink Our Cuts, Hospitals Tell Capitol Hill

By John Reichard, CQ HealthBeat Editor

January 8, 2009 --Congressional negotiators should adopt House-passed provisions to cover the uninsured or else reduce the cuts in Medicare hospital payments planned by lawmakers to help pay for expanded coverage, the American Hospital Association said Friday in a 27-page letter to House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Harry Reid, D-Nev.

The House bill would cover five million more uninsured Americans than the Senate bill and begin coverage a year earlier—in 2013 rather than in 2014, said the letter signed by AHA Executive Vice President Rick Pollack. The House bill would result in coverage of 96 percent of all those legally residing in the United States while the Senate bill would only cover 94 percent, the letter added. Hospitals want more insured customers to offset the impact of lower Medicare reimbursement.

The White House has stopped short of promising hospitals that overhaul legislation will lead to coverage levels that AHA said the Obama administration agreed to earlier this year in return for $155 billion in Medicare cuts over 10 years. Hospitals have said the Obama administration agreed to a coverage level of 97 percent.

Even getting to 96 percent seems iffy given the desire of Obama to keep the price tag for the overhaul bill at around $900 billion over ten years. But few observers expect hospitals to unleash an all-out attack on overhaul legislation if they don't get the coverage levels they want, predicting they'll unleash their lobbyists instead in coming years to reduce the Medicare cuts in overhaul legislation.

The $900 billion target is closer to the price tag of the Senate bill. To the extent lawmakers decide to spend more on coverage, they are under pressure to do so by beefing up the levels of subsidies in the Senate bill to help individuals comply with the mandate that they carry health insurance.

An analysis released Friday by the liberal-leaning Center on Budget and Policy Priorities said subsidies in the Senate bill are too low.

"For those who make less than 250 percent of the poverty line—about $55,000 for a family of four—the House bill does a better job than the Senate bill in ensuring that people can afford to purchase coverage," the analysis said. "The House bill also would ensure that individuals and families could seek the care they need without being deterred by overly burdensome deductibles and cost-sharing."

Center analysts said that if the Senate bill "forces people with modest incomes to spend substantial amounts to buy a health policy and those people then find that the policy does not cover much of their health care costs due to its high deductibles, it could prompt a voter backlash that adds fuel to expected efforts by opponents to repeal this historic health reform legislation in the years after it is enacted."

House Democratic leaders said this week that one of their top priorities in negotiations with their Senate counterparts is assuring sufficient subsidies.

AHA's take on insurance exchanges also is in sync with that of the House in so far as it supports a national exchange rather than a state-based approach.

"To ensure that an individual coverage mandate is meaningful, it will be important that insurance market reforms are not only thorough but also implemented rapidly," the AHA letter says. "Such a mandate would be greatly enhanced by a robust national health insurance exchange with a broad scope of authority that includes regulating health plans."

To no one's surprise, the letter strongly opposes the adoption of a new government-run insurance plan as an option in the exchange. "The creation of a public option to compete in the exchange, potentially open to all individuals, as well as small and large businesses, would put tremendous pressure on provider payment rates," the letter says.

AHA calls for an end to the Children's Health Insurance Program in 2013, arguing that "this population will be better served in a robust exchange as long as there are adequate subsidies" to buy coverage.

The letter devotes much attention to the bread-and-butter issue of "market basket updates," the yearly Medicare payment increases meant to compensate hospitals for changes in the cost of delivering care. Overhaul legislation reduces these updates, in large measure through a "productivity" adjustment that assumes that hospitals are becoming more productive in line with efficiency gains in the economy at large.

Market basket reductions should be minimized in years in which coverage is not expanded. Expansion doesn't occur until 2013 in the House bill and 2014 in the Senate bill. The letter protests that the House bill "applies a full productivity reduction in calendar years 2010 through 2012" and that the Senate bill "applies a full productivity reduction and adds a 0.1 percentage point reduction to productivity in both 2012 and 2013."

But AHA "strongly supports the Senate approach to market basket update reductions for 2010 and 2011, which would reduce the updates by 0.25 percentage points in each year."

The letter objects, however, that both the House and Senate bill would permanently reduce the annual market basket update by a measure of productivity growth after 2011. It strongly urges that negotiators "sunset the productivity adjustments after 2019, the end of the 10-year budget period" used to estimate the cost of overhaul legislation.

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