Medicare News
| For Immediate Release: | Contact: |
| Friday, May 30, 1997 | CMS Office of Public Affairs 202-690-6145 |
For questions about Medicare please call 1-800-MEDICARE or visit www.medicare.gov. |
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NO INCREASE IN MEDICARE HOSPITAL PAYMENTS PROPOSED FOR FY 1998
In accord with the bipartisan agreement to balance the federal budget, HHS Secretary Donna E. Shalala today recommended that hospitals receive no increase in Medicare payments in the coming fiscal year.
Congressional action is required to carry out this recommendation. Under current law, Medicare payments to hospitals would be based on a "market basket" index and would increase 2.8 percent in FY 1998. Secretary Shalala's recommendation is part of the administration's plan to reduce growth in Medicare spending by a total of $115 billion over the next five years. Medicare savings are one element of the bipartisan plan for a balanced budget in FY 2002.
"Medicare must become an increasingly prudent purchaser of health care services, and those who provide services to Medicare beneficiaries must do their fair share toward a balanced federal budget by increasing their efficiency and effectiveness," Secretary Shalala said.
Earlier this year, the independent Prospective Payment Assessment Commission also recommended a freeze on Medicare payment rates for hospitals in the coming fiscal year. In their March 1 report, commission members said a zero update "reflects projected inflation in the prices of hospital inputs and the commission's judgments about the likely effects of scientific and technological advances, productivity improvements and service changes, and changes in the mix of patients treated."
Medicare pays short-stay, acute-care hospitals a predetermined rate for inpatient hospital services furnished to Medicare beneficiaries, using a prospective payment system (PPS). Under PPS, a base payment rate for each admission is multiplied by a measure, called a diagnosis related group, which reflects the nature of a patient's condition. Hospitals in large urban areas (cities with more than 1 million people) receive slightly higher base payment rates than those in other urban and rural areas.
Current law requires that the rate increases for PPS hospitals be based on projections of growth in the prices of goods and services purchased by hospitals, known as the hospital market basket. The market basket is currently estimated to be 2.8 percent for FY 1998. The increase for non-acute care hospitals is based on an estimated 2.8 percent rise in the market basket calculated exclusively for these PPS-excluded hospitals.
Failing congressional action to put in place Secretary Shalala's recommendation for a payment freeze, the 2.8 percent increase would take effect Oct. 1 for the nation's 5,200 short-stay, acute care hospitals participating in Medicare and for 2,000 non-acute care hospitals -- psychiatric, rehabilitation, long-term and children's facilities.
Also included in the proposed regulation, which will be published June 2 in the Federal Register, is a 0.11 percent decrease in the federal capital PPS rate -- Medicare payments to hospitals for capital-related costs. The covered costs include depreciation, interest, taxes, insurance and similar expenses for plant and equipment.
Medicare paid $81.9 billion to inpatient hospitals providing acute, short-term care in fiscal year 1996. Under Secretary Shalala's proposal, hospital payments are expected to grow by 6.4 percent from $85.7 billion in FY 1997 to $91.2 billion in FY 1998.
