Hospital cuts on the way?

David M. Walker, Comptroller General of the United States, testified before Congress Wednesday and said, “If there is one thing that could bankrupt America, it’s runaway healthcare costs. We must not allow that to happen.”

He continued:

The federal government has essentially written a blank check for these programs. In contrast, other industrialized nations have put their healthcare programs on a budget, even ones with national healthcare plans. We should consider imposing limits on federal spending for healthcare sooner rather than later.

Coincidentally, today The New York Times has an article highlighting President Bush’s 2009 budget to be released Monday. The request is expected to surpass the $3 trillion mark for the first time in our country’s history. Health care is a target for cuts, specifically the Medicare and Medicaid programs.

Mr. Bush has repeatedly said that the costs of Medicare and Medicaid, which dwarf spending for lawmakers’ pet projects, are unsustainable. The two health programs account for nearly one-fourth of all federal spending, and their combined cost — $627 billion last year — is expected to double in a decade.

Budget documents show that Mr. Bush will propose legislative changes in Medicare to save $6 billion in the next year and $91 billion from 2009 to 2013. In his last budget, by contrast, his legislative proposals would have saved $4 billion in the first year and $65.6 billion over five years.

Most of the Medicare savings in the budget would be achieved by reducing the annual update in federal payments to hospitals, nursing homes, hospices, ambulances and home care agencies.

The budget would not touch payments to insurance companies for private Medicare Advantage plans, even though many Democrats and independent experts say those plans are overpaid.

In the next five years, the largest amount of Medicare savings, by far, would come from hospitals: $15 billion from an across-the-board reduction in the annual updates for inpatient care; $25 billion from special payments to hospitals serving large numbers of poor people; and $20 billion from capital payments for the construction of hospital buildings and the purchase of equipment.

Go read the full article. There’s lots more.

I don’t understand the policies of cost cutting by reducing payments to hospitals and other health care service organizations. Also on the table this year is a 10% across the board cut in Medicare reimbursements to physicians. What is the logic here?

In a time of economic uncertainty and decreasing margins hospitals will need cash to make investments in technology. Technology that all the U.S. Presidential candidates promise will cut costs. One example is the coming nationwide electronic medical record roll out–it is going to cost a significant amount of money. Dollars that are well spent. EMRs will help the system.

I appreciate the creativity and ingenuity that severe cost cutting will pump into the system. But the fact of the matter is that no matter how creative or ingenious our organizations are, implementing EMRs is going to be expensive. This is not a time to be significantly cutting reimbursements to hospitals. Further, lowering reimbursements to hospitals and physicians is not sound cost cutting policy. It may lower the government’s spending but the decrease in services and increase in cost shifting have the potential to be traumatic.

I can imagine hospital administrators around the country wanting to boo-yah the government the way Jim Cramer did to the Federal Reserve.


For what it’s worth (and that is probably a lot), the chances of the budget getting through Congress unchanged is at best below minimal.

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