July 2, 1999

On June 29, President Clinton unveiled a plan to modernize and strengthen Medicare. The plan is projected to save an estimated $72 billion over 10 years but could lead to loss of revenue for hospitals because it extends the Balanced Budget Act (BBA) beyond 2002.

Clinton's proposals seek to foster competition in both the traditional fee-for-service Medicare and the newer Medicare managed care plans as well as ensure access to affordable prescription drugs and preventive services. The plan is expected to extend the life of the Medicare trust fund an additional 12 years, to at least 2027.

The money to fund these proposals would come largely from reduced payments to health care providers. Clinton's plan calls for a cut of $39 billion over 10 years to providers. Additional problems could stem from the plan's proposal to seek volume discounts from doctors, much the way managed care plans do. A modest $7.5 billion would be set aside over 10 years to repair unintended consequences of the BBA.

While applauding Clinton's efforts to ensure Medicare's solvency and provide needed prescription drug coverage, Samuel O. Thier, MD, president and CEO of Partners, said that the plan did not provide nearly enough relief for teaching hospitals suffering from BBA cuts. "We hope this proposal is just a starting point and that any bill eventually passed will do a much better job of responding to the very real needs of hospitals like ours," he says.

Partners and MGH officials, along with a national coalition of colleagues from other teaching hospitals, have been concerned about the effects of the BBA and have spent the last year meeting with congressmen and White House officials. James J. Mongan, MD, president of the MGH, recently met with Donna Shalala, secretary of US Health and Human Services, and Dennis Hastert, speaker of the US House of Representatives, to reinforce the need for changes in the provisions.

Under the BBA, the Partners system is expected to experience cutbacks of $340 million over a five-year period. The BBA's impact on the MGH is expected to be more than $165 million. The coalition is supporting legislation filed by Sen. Daniel Moynihan (D-New York) that would freeze indirect medical education funds at current levels. These funds, which also were reduced by the BBA, pay academic medical centers for some of the costs incurred by their teaching programs.

In addition, the coalition of teaching hospital leadership is working closely with the American Hospital Association and the Association of American Medical Colleges to support legislation that would redefine criteria for Medicare outpatient and home care reimbursements.

"Washington needs to understand that the Medicare cuts in the BBA threaten patient care," says Colton. "The BBA has already started to affect hospitals, particularly teaching hospitals. Partners hospitals are full, but under the BBA, Medicare will pay us less for delivering even more care."

For more information about the BBA, call Partners Government Relations
at 278-1041.