Medicare Compliance & Reimbursement

Budget reconciliation bill becomes law, sets the tone for further budgetary growth restrictions in 2007.

The 2006 budget reconciliation bill's threats to Medicare and Medicaid funding are now quite real--and they may only get worse.

President Bush signed the 2006 budget reconciliation bill (S 1932) Feb. 8--just one week after he outlined his 2006 health care initiatives in the Jan. 31 State of the Union address. The budget bill narrowly passed House and Senate votes and faced a second close House vote Feb. 1.

The new law reduces Medicare spending by $6.4 billion and Medicaid spending by $4.8 billion over the next five years. Although the law reverses the 4.4-percent physician pay cut that went into effect Jan. 1, it will also cause some Medicare beneficiaries to face higher premiums. States will be able to charge higher copayments to Medicaid benes and deny services for lack of payment.

Bush staunchly defended the cuts at the signing. "By 2030, spending for Medicare, Medicaid and Social Security alone will be almost 60 percent of the entire federal budget," he notes. "That will leave future generations with impossible choices--staggering tax increases, immense deficits or deep cuts in every category of spending."

Further Cuts Must Follow To Sustain Medicare, Bush Says

Now that the controversial 2006 budget bill is finally out of the way, the President has begun to focus on 2007 budget measures. Bush's 2007 budget proposal could have some dramatic effects on Medicare--among them, new financing measures that propose to strengthen Medicare's sustainability and health insurance reform proposals that further the President's movement toward consumer-driven health care.

Medicare would take the hardest hit under the proposal, which would cut $35.9 billion in Medicare spending over five years and reduce reimbursement rates for hospitals, nursing homes and home health care providers. The President's budget proposal would also trim nearly $5 billion in Medicaid spending.

"These are not cuts," White House budget director Joshua Bolten tells reporters. "These are modest reductions in the rate of growth."

In a Feb. 8 House Ways and Means Committee hearing on the budget proposal, Health and Human Services secretary Mike Leavitt supported the cuts as "steps to improve the long-term fiscal health of Medicare."

The 2007 budget proposal also contains provisions to promote greater use of health savings accounts among consumers--a move that supports the President's controversial initiatives toward consumer-driven health care. "If we take incremental steps now, steady steps now, we can make the program sustainable without having to go to drastic changes in taxes or drastic changes to benefits," Centers for Medicare & Medicaid Services Administrator Mark McClellan says in support of the budget's HSA proposals.

Despite government assurances to Congress and industry leaders that Medicare cuts will help the program, many Congress members have called the proposal a "tough sell," and health care agencies worry about its effects on benes and providers.

The looming Medicare cuts "will shift costs to beneficiaries and force more to pay higher Medicare premiums," AARP notes in a recent statement. In addition, the proposal's physician payment cuts threaten to drive some providers out of practice.

"We implore Congress to follow the advice of its own Medicare advisory commission and replace the current flawed physician payment update system with one based on practice cost increases," says American Medical Association president J. Edward Hill in a Feb. 7 statement. "Until the physician payment problem is permanently resolved, seniors' access to care will be repeatedly placed in jeopardy."

To view the complete 2007 budget outline, go to www.whitehouse.gov/omb/budget/fy2007/hhs.html.