- For-profit hospital lobby the Federation of American Hospitals is urging Congress to waive an upcoming 4% spending cut in Medicare before it takes effect next year, citing the ongoing financial pressures of COVID-19.
- FAH, which represents some 1,000 hospitals, sent a letter to lawmakers on Tuesday asking them to address pay-as-you-go cuts in an upcoming government funding package that needs to be passed before funding expires at the end of September.
- The cuts, if they go through, will result in an estimated loss of $36 billion in funding in 2022 alone, FAH said, citing Congressional Budget Office estimates.
The letter is the latest action from hospital lobbies looking to preserve higher payments in the cash-strapped Medicare program and citing the ongoing coronavirus pandemic to do so, despite evidence many big U.S. systems have so far survived COVID-19 with little long-term hit to their financial solvency.
If lawmakers allow the cuts to go into effect, it will mark the first time that Congress has not waived the pay-go sequester. Without action before the year's end, the mandatory cut starting Dec. 31 will be "unsustainable for hospitals and health care providers still battling COVID-19," FAH argued.
According to the trade association, the 4% pay-go cut, which is due to the American Rescue Plan passed in March, will overlap with the expiration of a current pause on the 2% Medicare sequester, stemming from the Budget Control Act of 2011.
Those cuts, which FAH called "extreme," could harm already shrinking revenue streams for providers, "which is unconscionable amid a public health crisis," FAH CEO Chip Kahn wrote in the letter to House and Senate leaders.
However, despite repeated calls from hospital lobbies for additional government assistance as the pandemic drags on, federal subsidies last year offset the worst of COVID-19's financial effects, research has shown. And a volume recovery in the first half of 2021 as deferred care returned contributed to major systems like Tenet, HCA, Universal Health Services and Community Health Systems all beating Wall Street expectations on earnings and revenue in the second quarter. Still, uncertainty persists due to rising caseloads spurred by the delta variant.
The need to curb costs in Medicare is increasingly important as the program runs dangerously low on funds. Policymakers expect the pot that funds the Part A hospital benefit to become insolvent by 2026 without legislative action, as spending continues to increase in the program.
Spending in Medicare is expected to balloon from its current level of 4% of the gross domestic product before leveling off at 6.5% in just a few decades, according to a recent report from the Medicare Board of Trustees. But that outlook could be significantly higher if cost reduction measures (like the pay-go cuts) are scaled back, trustees warned in the report published Tuesday.
If that's the case, Medicare spend could get as high as 8.5% of the GDP by 2095, greatly straining the U.S. economy and the federal budget, while threatening coverage for America's seniors, the trustees said.