Bush Administration Proposes Massive Medicare Reimbursement Cuts
The Bush administration says it plans sweeping changes in Medicare payments to hospitals that could cut payments by 20 to 30 percent for many complex treatments and new technologies.The changes, the biggest since the current payment system was adopted in 1983, are meant to improve the accuracy of payment rates.
But doctors, hospitals and patient groups say the effects could be devastating.Federal officials said that biases and distortions in the current system had created incentives for hospitals to treat certain patients, on whom they could make money, and to avoid others, who were less profitable.
Michael Leavitt, the secretary of health and human services, said the new system would be more accurate because payments would be based on hospital costs, rather than on charges, and would be adjusted to reflect the severity of a patient’s illness. A hospital now receives the same amount for any patient with a particular condition, regardless of severity.Medicare pays more than $125 billion a year to nearly 5,000 hospitals.
The new plan is not expected to save money, but will shift billions of dollars, creating winners and losers. The effects will ripple through health care, because many private insurers and state Medicaid programs follow Medicare’s example.Dr. Alan Guerci, president of St. Francis Hospital in Roslyn, N.Y., said the new formula would cut Medicare payments to his hospital by $21 million, or 12 percent.