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From: Congressional Quarterly HealthBeat

By Mary Agnes Carey, CQ HealthBeat Associate Editor

FEBRUARY 6, 2006 -- Hospitals, pharmacists, and patient advocates said Monday the Bush administration's proposed fiscal 2007 Medicare and Medicaid cuts would erode the quality of care provided under the two government programs.

In Medicare, hospitals, home health agencies, skilled nursing facilities, and other providers would be hit with nearly $36 billion in cuts over the next five years compared with spending under current law.

The plan would also force a mandated cut in Medicare spending if general revenues exceeded 45 percent of total Medicare spending. However, administration officials said cuts under that "hard trigger" could be delayed for years if their other proposed reductions in Medicare spending growth become law.

The Bush plan also would reduce federal spending on Medicaid and the State Children's Health Insurance Program (SCHIP) by $13.6 billion over the next five years, financed in part by changes in Medicaid reimbursements to pharmacists.

Centers for Medicare and Medicaid Services Administrator Mark B. McClellan said Monday that many of the payment changes included in the fiscal 2007 budget are consistent with recommendations from the Medicare Payment Advisory Committee (MedPAC), which advises Congress on payment policy.

McClellan and Department of Health and Human Services Secretary Michael O. Leavitt also stressed that federal spending on both Medicare and Medicaid would continue to climb despite the proposed payment reductions. They said fiscal restraint is needed to ensure the programs continue to serve those who need them most.

Medicare Cuts Now ...

The Bush budget proposes that the "market basket" used as the basis for calculating yearly Medicare payment increases for inpatient care be lowered by 0.45 percentage points. The proposal also would reduce the market basket increase in fiscal 2008 and fiscal 2009 by market basket minus 0.4 percentage points. The same market basket adjustments would apply to the Medicare hospital outpatient payment update.

The administration's budget would provide a zero percent payment update for skilled nursing facilities, home health agencies, and inpatient rehabilitation facilities for fiscal 2007, according to HHS budget documents. Payments for hospice and ambulance services would be reduced by 0.4 percent for each of the years 2007 through 2009.

... And Later (Maybe)

As a way to help control spending caused by an influx of Baby Boomers into Medicare in several years, the Bush plan mandates a four-tenths of one percentage point reduction to all Medicare payments if general revenues top 45 percent of total Medicare financing and Congress does not intervene.

McClellan said the proposal builds on provisions in the Medicare drug law (PL 108-173) that require the president to submit legislation to Congress to curtail Medicare spending if general revenue contributions to the program are projected to pay more than 45 percent of total Medicare expenditures for two consecutive years. Under current law, the House and Senate are required to follow specific guidelines for consideration of such legislation, but they are not required to act on it.

By exercising discipline over Medicare spending now, tougher steps like the longer-term mandated cuts can be delayed, HHS officials emphasized. The trigger would be pushed off until 2017 instead of 2012, the current prediction of when general revenues will reach the 45 percent mark.

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