Out of Touch with Reality: Pushing Back on Editorial in The Washington Post Calling for Medicare Cuts to Hospitals and Health Systems

The editorial board of The Washington Post has published an opinion piece calling for payment cuts to hospitals and health systems as part of efforts to stabilize the Medicare program. The editorial calls for adopting so-called site-neutral payment policies, decreasing federal payments to teaching hospitals and reducing coverage of bad debt to 25%. It also recommends other proposals on containing costs for Medicare Advantage and raising a tax on the investment income of people who earn more than $400,000 a year. The hospital-focused proposals have surfaced in the past and routinely are included in the Congressional Budget Office’s annual option list for reducing the deficit in all government programs.

In a statement on the proposal, AHA President and CEO Rick Pollack said, “We must not attempt to solve our nation’s budget problems on the backs of health care providers and patients. After years of a once-in-a-lifetime global pandemic where hospitals and health systems treated more than 6 million COVID-19 patients while simultaneously dealing with near historic inflation, rising expenses for drugs, supplies, and labor, and incredible workforce pressures, now is not the time to cut Medicare funding for physician training and support to those caring for our sickest patients. According to the government’s own data, Medicare already chronically underpays providers for caring for patients, and it’s time for policymakers to acknowledge the enormous challenges facing hospitals and health systems today. Our nation cannot consider proposals that could lead to a collapse of our health care system and reduced access to care. There is too much at stake for the patients and communities that depend upon hospitals and health systems to always be there, ready to care.”

Read on for more details refuting the specific policy proposals focused on hospitals that are outlined in the editorial.

SO-CALLED SITE-NEUTRAL PROPOSALS

Reality: Standardizing costs regardless of location – commonly referred to as site-neutral policies – are dangerously misguided as they fail to account for the fundamental differences between hospital outpatient departments and other sites of care. Implementing site-neutral payment policies would reduce access to health care services, especially in rural and other underserved communities.

Policy: Hospital outpatient departments — such as hospital-owned clinics that provide complex cancer, pediatric and mental health services — should not be paid the same Medicare rate as a stand-alone physician office. These outpatient departments treat all patients who come through their doors, regardless of medical complexity or income level, unlike other sites of care that may be ill-equipped or unwilling to care for sicker and otherwise more vulnerable patients. They also are held to more rigorous licensing, accreditation and regulatory requirements. Implementing site-neutral payment policies could force hundreds of outpatient clinics to close or cut back on critical services, resulting in reduced patient access and job losses.

The cost of care delivered in hospitals and health systems, including HOPDs, is fundamentally different from other sites of care and thus needs to take into account the unique benefits they can solely provide to their communities. This includes maintaining standby capacity for natural and man-made disasters, public health emergencies, other unexpected traumatic events, and the delivery of 24/7 emergency care to all who come through their doors, regardless of ability to pay or insurance status. Since the hospital safety-net and emergency standby roles are funded through the provision of all outpatient services, expanding site-neutral cuts to additional HOPDs and the outpatient services they provide would endanger the critical role that they play in their communities, including access to care for patients, especially the most medically complex.

The proposal outlined in The Washington Post editorial would cut $141 billion in payments over 10 years. Hospitals Medicare outpatient margins are already around negative 20%. These drastic cuts would force hospitals to reduce or eliminate many services that patients and communities depend on each and every day.

See the AHA fact sheet for more details.

DECREASING PAYMENTS TO TEACHING HOSPITALS

Reality: If there was ever an example of penny wise and pound foolish, this is it. The Washington Post editorial proposes to cut federal payments to teaching hospitals by $68 billion. A proposal that seeks to reduce support for developing more physicians is dangerously out of touch with the current state of our health care workforce, which, to put it mildly, is in crisis. The health care field has lost thousands of talented health care professionals, including physicians, over the last few years. Without a dedicated, highly trained and skilled caregiver workforce our system of care collapses. Decreasing payments to teaching hospitals would exacerbate the mounting and critical physician shortages our nation faces.

Policy: Estimates show that the U.S. faces a shortage of 124,000 physicians by 2033, and this will jeopardize access to care in communities across the nation. These shortages — combined with an aging population, a rise in chronic diseases and behavioral health conditions, physician burnout from the pandemic, and “state-of-the-art” care delivery advancements — all contribute to a need for robust graduate medical education (GME) funding to adequately prepare America’s health care workforce for the health system of the future and ensure continued access to care.

Instead of cutting payments to teaching hospitals, Congress should increase the number of Medicare-supported GME residency positions. Medicare-funded residency positions would enhance access to care for patients and help America’s hospitals better meet the needs of the communities they serve. Increasing Medicare-funded residency slots would provide more flexibility to diversify and maintain training programs, including both primary care and specialty programs to better serve patients. In addition, an increase in slots would allow health systems to train residents in more diverse facility types, such as smaller rural hospitals which may not be able to operate their own training programs.

REDUCING COVERAGE OF BAD DEBT TO 25%

Reality: Reducing Medicare bad debt payments to hospitals could result in the loss of health services and programs that are essential for Medicare patients, as well as all patients cared for by hospitals and health systems.

Policy: As part of Medicare’s obligation to its beneficiaries, particularly those who are often the most vulnerable, the program reimburses hospitals for a portion of the bad debt incurred by Medicare patients. Bad debt occurs because some Medicare patients cannot pay the cost-sharing requirements established by the government. In short, Medicare bad debt is a symptom of failures by the program to provide adequate coverage for many beneficiaries, and the solution cannot be to shift more of the burden onto the hospitals and health systems that care for them. The proposal outlined in The Washington Post editorial would reduce the government’s share from the current 65% to 25% percent; hospitals and health systems would have to absorb the rest.

Medicare already pays hospitals substantially less than the cost of caring for patients. AHA survey data finds that the federal government only pays 84 cents for every dollar hospitals spend providing care to Medicare beneficiaries. In addition, hospitals in 2020 provided $42.67 billion in uncompensated care, meaning care for which no payment was received from the patient or insurer. Since 2000, hospitals and health systems have provided nearly $745 billion in uncompensated care.

Moreover, reducing Medicare bad debt reimbursement also would disproportionately affect hospitals that treat high numbers of low-income Medicare beneficiaries, safety-net hospitals and rural hospitals. More specifically, it would leave safety-net hospitals with less of an ability to serve low-income Medicare beneficiaries who may not be able to afford cost-sharing requirements. And it would add to the stress of rural hospitals and the patients they serve, as their small size leaves them with more limited cash flow and less of an ability to absorb bad-debt losses. In addition, rural hospitals have Medicare bad debt percentages that are higher than urban hospitals, on average.