Health and Human Services Secretary Margaret M. Heckler announced her final approval yesterday of a controversial regulation freezing fiscal 1986 Medicare payment rates to hospitals at this year's level.
The freeze, strongly opposed by the hospital industry, is designed to cut hospitals' Medicare income by $1.8 billion compared to a normal rate increase to cover medical inflation.
The Prospective Payment Assessment Commission, an agency set up to study Medicare rate issues and make recommendations each year on how much hospital rates should be raised to compensate for inflation, had recommended a 2.1 percent increase in fiscal 1986, which starts Oct. 1.
Heckler said yesterday she had considered that recommendation but nonetheless decided to impose the freeze.
However, Congress may reverse her decision when it returns next month. The House Ways and Means Committee rejected a rate freeze in acting on a package of Medicare proposals July 23-24, and approved a hospital increase of 1 percent.
If the House and Senate eventually endorse that recommendation, Heckler's freeze would be nullified. The Senate Finance Committee is expected to act on the issue shortly.
Heckler also announced yesterday that in fiscal 1986 the total payment to a hospital treating a Medicare patient will be based 75 percent on the federal rate and 25 percent on the hospital's historic costs, instead of the 50-50 split in effect this fiscal year.
This shift is part of a four-year transition provision written into the Medicare law in 1983 to establish uniform national rates to hospitals for 469 different types of illnesses.
The projected new national rates would be lower than many high-cost hospitals had been receiving, particularly in the Midwest and Northeast.
This year, many high-cost midwestern and northeastern hospitals complained that going from a 50-50 split to 75-25 would be too harsh. They wanted to freeze the split at 50-50. However, Heckler rejected that proposal.
On this, too, she may eventually be reversed by Congress. The Ways and Means bill freezes the split at 50-50 for fiscal 1986.
Additional sections of the regulation approved by Heckler include the use of a new wage index, retroactive to 1983, in hospital payment calculations, to adjust for area differences in part-time employment; use of an updated system in the scale showing which illnesses are more serious and therefore should get higher rates; and revision of the methods for counting interns and residents in determining payments to hospitals.