Hurricane costs: Cleanup bill shuffles health budget priorities

Relief efforts push Medicaid to center stage and complicate consideration of legislation on Medicare physician pay updates.

By David Glendinning — Posted Sept. 26, 2005

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Washington -- The ripple effects of Hurricane Katrina that have reached Capitol Hill have raised concerns about the impact to physicians once next year's Medicare reimbursement checks start arriving. But the AMA says Medicare payment reform is still possible.

Congress postponed until October consideration of budget reconciliation bills that serve as one of the likely vehicles for a measure to stave off the upcoming Medicare cuts. Lawmakers instead shifted their immediate focus to the complex task of seeking recovery funding for hurricane-affected areas and providing assistance for people the disaster displaced.

When they do return to the table to discuss long-term health care spending, lawmakers could face an altered set of priorities when it comes to Medicare physician pay, said Senate Majority Leader Bill Frist, MD (R, Tenn.). In the immediate aftermath of the crisis, Medicaid relief has taken precedence as the nation grapples with how to address the public health care needs of evacuees.

"I pushed the reconciliation back in part to see what the needs are, to see where there can be reductions in [entitlement] spending growth and to see where savings can come from," he said. "I'm sure there'll be talk about physician payments and about whether to throw them into the discussions about the inner mixing of Medicare and Medicaid. Right now we're just catching our breath and focusing on Medicaid."

Dr. Frist said no decisions had been made, but aides and lobbyists familiar with the budget negotiations said available funding for physician reimbursement was becoming even more elusive as the initial bill for the hurricane damage crept over the $60 billion mark. Congress would need to find scarce billions of dollars elsewhere even to turn next year's projected 4.3% Medicare reduction into a modest increase.

But the AMA is not backing off its effort to update physician pay because of the new realities facing a post-Katrina Capitol Hill, said AMA President J. Edward Hill, MD. The need to preserve seniors' access to care is just as important as it was before the hurricane hit, he said.

"We also are working very hard on getting as much short-term and long-term relief to those affected by this disaster," said Dr. Hill, who spoke from the site of an AMA Board of Trustees meeting that focused on the hurricane aftermath. "However, that doesn't make other issues that are vitally important go away."

The Association will continue to lobby strenuously for full-scale payment system reform as well as for a reversal of the first of several cuts set to take effect in January. As to whether the need to safeguard access to care will become even more pressing as displaced Medicare beneficiaries seek physicians in new areas of the country, the AMA cannot speculate at this time, Dr. Hill said.

Regardless of the budgetary situation that Congress finds itself in when it returns to Medicare in October, the Association is confident that enough congressional support exists for fixing the physician reimbursement system, and AMA leaders believe that finding the necessary money might not prove that daunting.

"There certainly is an increased cost associated with fixing problems like the Medicare payment issue, and that's their job to figure out how they're going to come up with those funds," Dr. Hill said. "It's amazing how they can come up with funds when they need them, and we think they can give relief to seniors starting in January just as they have given and are going to give tremendous relief to those Katrina victims."

New Medicaid priorities arise

With Medicare largely on the back burner in the immediate wake of the hurricane, Medicaid took on new dimensions in the debate in Washington.

The movement of hundreds of thousands of evacuees to other regions of Louisiana, Mississippi and Alabama -- as well as to other states -- highlighted the need for flexibility in the Medicaid program during emergency situations, said U.S. Surgeon General Richard Carmona, MD, MPH. In the days after the mass evacuations, federal officials took steps to reduce administrative barriers to Medicaid coverage, allowing those displaced to claim eligibility without demonstrating that they meet the program's income requirements.

The goal is to turn evacuees into "universal citizens" in the eyes of the public health system, Dr. Carmona said. Centers for Medicare & Medicaid Administrator Mark McClellan, MD, PhD, said the federal government would pick up the tab for extra costs incurred by treating the new patients, but he did not reveal specifics of the long-term reimbursement plan to states.

Congress also is considering sending extra help to states such as Texas, which is seeing an unprecedented influx of people who are likely to need public health assistance in the coming months and years. Dr. Frist said he would urge the Senate to consider legislation that would increase the federal matching rate that the government provides to the affected states. Several Democratic lawmakers introduced bills that would establish a dollar-for-dollar match in certain states.

As a result of the new priorities, plans to cut $10 billion from Medicaid over the next five years through the postponed budget reconciliation process might prove to be a tougher sell to lawmakers. Soon after Katrina hit, a bipartisan group of senators urged budget leaders to indefinitely put off the process of finding the cuts.

While maintaining that Congress could make legitimate reductions to the program by eliminating waste, fraud and abuse, Dr. Frist said proposals that would limit care would be unacceptable in the current situation.

"If that reduction in spending over time in some way is linked in real terms to cutting back on care ... for individuals, it would be absolutely the wrong thing to do," he said.

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