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Stark to Seek Wide Range of Medicare Cuts

By John Reichard, CQ HealthBeat Editor

May 14, 2007 -- House Ways and Means Health Subcommittee Chairman Pete Stark will intensify efforts this week to lay the groundwork for Medicare cuts likely to target many sectors in health care. The California Democrat has already clarified that he will try to trim payments to Medicare Advantage plans, but this week he'll begin turning more of his attention to Medicare payments to hospitals, home health agencies, and skilled nursing facilities.

Stark is likely to have to hit many sectors because of how much money he'll need—up to $100 billion, lobbyists estimate—to fund Democratic policy priorities, ranging from covering more uninsured children to blocking payment cuts to doctors.

At a hearing Tuesday, Stark's panel will review current payment levels to hospitals, home health agencies, and skilled nursing facilities, but he may have to range farther than that in pursuit of savings to expand the number of uninsured children covered by Medicaid and the State Children's Health Insurance Program (SCHIP).

His task is complicated by the difficulty he faces obtaining significant sums of money from cuts to the managed care plans in the Medicare Advantage program and from hospitals, both of which are politically powerful.

The politics of blocking scheduled payment cuts to doctors also are problematic, with some lobbyists predicting Stark will seek a two-year physician payment "fix" to block scheduled cuts to doctors in 2008 and 2009. Stark won't want to be busy trying to cut other Medicare payments to providers during next year's election campaigns to pay to block cuts to doctors that would take effect in 2009, lobbyists say.

Stark reportedly told the American Hospital Association last week that he intends to trim the full "market basket" increase hospitals are scheduled to receive in Medicare inpatient payments under current law. He's not alone in recommending that step; the Bush administration also has called for cutting inpatient payments next year.

And both the administration and the Medicare Payment Advisory Commission also have urged that payments be frozen at current levels to home health agencies and skilled nursing facilities.

One health care lobbyist predicts that the home health sector will be "absolutely annihilated" in Stark's Medicare cuts proposal because of the big profit margins that sector enjoys in treating Medicare patients. But home health cuts likely would raise no more than $8 billion over five years, he calculates.

Because virtually every member of Congress has a hospital in his or her district and that those facilities are typically large or even the largest employers, he doubts Stark will be able to obtain cuts of more than $10 billion over five years from that sector.

He notes that the hospital industry has already been loudly protesting fiscal 2008 hospital payment cuts proposed by the Bush administration in its regulatory proposals. Hospitals will protest, "they gave at the office" when Stark proposes legislation that would trim them along with the regulatory proposals, he said.

The health care lobbyist estimated that a freeze in payments to hospices and skilled nursing facilities would raise $1.5 billion, and that cuts to Medicare Advantage plans would total around $23 billion. Those various cuts would about pay the cost of a two-year doctor payment fix and extend various expiring payment provisions Congress typically renews when they expire each year, such as an exemption to the current cap on Medicare payments for rehabilitation therapy.

Meanwhile, the Senate doesn't appear keen on cutting much from Medicare Advantage plans, even though they are paid considerably more than providers in traditional Medicare. While "private fee-for-service plans" in Medicare Advantage may have less political backing and therefore be more vulnerable to cuts, a managed care executive says that enrollment in those plans still isn't large enough so that cuts in their payments would generate big savings.

The difficulties Stark faces raise doubts that he'll find the money to pay the $50 billion, what lawmakers figure it will cost to cover the six million or so uninsured children now eligible for—but not yet enrolled in—Medicaid or SCHIP.

The managed care executive also expressed uncertainty about the SCHIP and Medicaid expansion. White House officials have said they don't want to expand SCHIP, "so who knows what's going to happen there," the executive said.

Other tactics, such as taxing tobacco or dropping "pay-go" rules requiring cuts or tax increases to fund program expansions, also are politically dicey. What that may mean in the end is that Democrats at best can only make a start on expanding children's coverage, lobbyists say.

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