Medicare hospitals take hit in fiscal cliff deal

January 12th, 2015

Not surprisingly, Congress pushed out an 11^th-hour deal to avoid going over the fiscal cliff. Also not very surprisingly, yet another temporary “doc fix” was included. So while the 26.5% Medicare SGR payment cuts have been avoided for now, the issue – delayed since 2002 -- has been delayed until next January. Will Congress ever come to a more permanent solution?

“This patch temporarily alleviates the problem, but Congress’ work is not complete; it has simply delayed this massive, unsustainable cut for one year,” says American Medical Association president Jeremy Lazarus, MD. “Over the next months, it must act to eliminate this ongoing problem once and for all.”

And now, the bad news: In order to sustain the doc fix, Medicare hospitals will have to bear half the cost by sustaining cuts in payments to the tune of about $10.5 billion over the next 10 years. Medicaid disproportionate share payments will be reduced by $4.2 billion, also over the next decade.

Hospitals, of course, are dismayed. “While fixing the physician payment formula is essential, it should not be done by jeopardizing hospitals’ ability to care for seniors and their communities,” said American Hospital Association president Richard Umbdenstock. "That’s why we are very disappointed at the approach taken in this measure.”

In addition, the remaining funding for the non-profit, consumer-owned insurance plans has been killed. While nearly $2 billion has already been loaned to create these co-ops in 24 states, the fiscal cliff plan has pulled the remaining $1.4 billion planned to further fund the co-ops. The Affordable Care Act included funding for these programs as a way to compete with larger insurance companies.