Medicare official warns that proposed cuts could hurt hospitals and nursing homes

By Lori Montgomery
Washington Post staff writer
Saturday, December 12, 2009

A Senate plan to cut Medicare to pay for an overhaul of the health system would threaten the profitability of roughly one in five hospitals and nursing homes over the next decade, according to a new analysis by the government official responsible for monitoring the popular health program.

In a report Friday, Rick Foster, chief actuary for the Centers for Medicare and Medicaid Services, questioned the sustainability of many of the proposed cuts, the major source of funding in a plan to extend insurance to more than 30 million additional Americans.

The proposal to reduce payments to hospitals and other providers, to force them to adopt more efficient practices, could prove particularly problematic for institutions that serve large numbers of Medicare patients, Foster wrote. He warned that many institutions might drop Medicare, "possibly jeopardizing access to care for beneficiaries."

Moreover, he wrote, simulations by his office suggest that 20 percent of institutional medical providers would become unprofitable within a decade.

The report echoes concerns Foster raised last month about similar cuts in the House bill, but it offers a more specific warning about the potential magnitude of disruption in the health sector.

The White House disputed the claim that providers would become unprofitable and that savings would not be sustained. "History shows otherwise," spokesman Reid Cherlin said. "Congress has implemented even larger savings in Medicare in the past, and no access problems materialized."

Democrats say doctors and hospitals rarely pull out of the Medicare program, and providers have agreed to the cuts in exchange for the chance to serve millions of new customers with insurance.

Senate Finance Committee Chairman Max Baucus (D-Mont.), the Senate bill's chief architect, focused on other aspects of the report Friday, hailing Foster's conclusion that the Medicare savings, if realized, would extend the financial life of the program by nearly a decade and would reduce premiums and cost-sharing for beneficiaries by an annual average of nearly $700 per couple.

Republicans played up Foster's conclusion that overall health spending in the nation would increase slightly under the bill.

"This chief actuary is the person the administration depends on to give it straightforward, unbiased analysis of the impact the legislation would have," said Senate Minority Leader Mitch McConnell (R-Ky.). "This is the official referee talking."

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