Updated on: October 23, 2019

“Let’s not Point Fingers:” Feds cut $253 billion from Hospital Payments

Original story posted on: October 22, 2019

The recent study was commissioned by the American Hospital Association and the Federation of American Hospitals.

A report released last week found that the federal government has reduced Medicare and Medicaid payments to hospitals by nearly $253 billion, through 12 different legislative actions since 2010.

$253 billion.  

Two quick notes about the calculation of this sum:

  1. First, while the reductions reflect legislation and regulations that have been passed since 2010, the analysis did not include any reductions – or, perhaps increases – that may have been a result of the Patient Protection and Affordable Care Act (PPACA) itself.
  2. Second, the analysis includes reductions projected out 10 years from now, through to 2029. So the report is projecting that because of legislation passed in the last nine years, in 2029 we will see a total of $253 billion reduction in hospital payments over the prior 19 years.

A listener of Monday Monitors wanted to know what administration passed the majority of these cuts. Although it is not included the report, you can track which administration was in place, according to the dates of the laws listed in the report:  

  • Under President Obama, for the six years after 2010, there were about $127 billion in reductions.
  • Under President Trump, after three years of his presidency, there were about $34 billion in reductions.
  • The remaining reductions occurred through legislation on Medicaid disproportionate share hospital payments, and multiple regulatory moves that didn’t have dates affixed to them in the report.

Hold that thought, though. Most of these cuts were made through legislation, which Congress had to pass. Again, this is not in the report, but:

  • When Obama had a Congress that was Democrat-dominated – that is, 2010, for the purposes of this report – there didn’t appear to be any reductions, except for those that may have been made via the aforementioned PPACA which were not counted in this report.
  • When Congress became split under Obama for four years, with Republicans taking the Senate and Democrats in the House, about $80 billion in reductions were passed.
  • When Republicans had both houses for four years, in the last few years of Obama administration and the first two years of Trump’s term, about $60 billion in reductions were passed.
  • Finally, for the past year under Trump, with Democrats in control of the House and Republicans in the Senate, about $15 billion in reductions have been put in place.

So, given the different mixes in Congress over the past nine years, I don’t know how quick I would be to point fingers at any one party for these reductions.

How are hospitals making up the shortfall in Medicare reimbursement? At least one study says that employee health plans may be picking up some of the slack. A study released earlier this year found that between 2015 and 2017, at least in some states, hospital healthcare cost for employee health plans rose 5 percent.

Last week on Monday Monitors, there were a number of reports that touched on President Trump’s executive order on Medicare in early October. I’ll leave you with two observations that others have made about that executive order, with respect to Medicare reimbursement policies:

  1. First, along with boosting the Medicare Advantage program, the president called for a report on how Medicare fee-for-service can better align with commercial insurance prices. This seems to indicate some intent to increase reimbursement from Medicare.
  2. Second, the main political intent of the executive order was to fight this idea of Medicare for All. Originally, you may remember, the executive order had the action-movie tagline title of “Protecting Medicare from Socialist Destruction” (not kidding.) But won’t boosting Medicare Advantage and talk of raising Medicare reimbursement be a great advertisement for Medicare – and, thus, increase the attractiveness of Medicare for All?

Food for thought.

Matthew Albright

Matthew Albright is the chief legislative affairs officer at Zelis Healthcare. Previously, Albright was senior manager at CAQH CORE, and earlier, he was the acting deputy director of the Office of E-Health and Services for the Centers for Medicare & Medicaid Services.

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