Analysis — Providers rage as Bush budget asks for more while promising less

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The howls were loud, clear and in unison after President Bush released his proposed 2008 Budget last month. It seemed there wasn't a single voice missing from the healthcare provider chorus.

That's because most of them – long-term care providers in particular – were told they would be getting no inflationary reimbursement raise in 2008 and then reductions of 0.65 percentage points during each of the next four years. For nursing homes, it would mean a $1 billion loss at the pay window next year alone, and $10 billion over a half decade.
Even though it was just a Republican president's $101 billion proposal in a town with a Democrat-controlled Congress, providers were shaken by its toll. In all, Bush was calling for more than $39 billion from providers.
They could know soon just how much trouble they might be in for. House leaders said they wanted to complete budget negotiations by mid-March. That may be an overly optimistic goal, but by early April, it should be clear if trouble is imminent.
"It's said 'The president proposes and the Congress disposes.' Hopefully, that will ring true this year," said David E. Hebert, senior vice president of policy and government relations for the American Health Care Association. "The real question will be early on, whether the Democrats agree to a budget resolution."
It's a long shot. Newly empowered Democrats largely called Bush's proposal "dead on arrival."
Future shock?
Tom Scully, the former chief of the government's Medicare and Medicaid programs, said he saw it as merely a pretext for later battles.
"It's not going anywhere this year or next year. It's all about after the next election," Scully predicted.
Providers could be in big trouble sooner than that if the administration procedurally bypasses congress with "administrative fixes."
It's been done before, though it was unclear, as of press time, how much appetite the administration had for what would surely become a high-pitched battle.
"We're talking about $10 billion over five years," Hebert said. "Even in Washington terms, that's a lot of money.
"Our concern is Congress and the administration want us to increase quality, but at the same time, we see a proposal to drastically cut funding. You can't have it both ways," he noted. "My view is to expect the worst and hope for the best."
LTC providers are essentially competing against other providers and beneficiary groups for a limited pot of money.
Senate Finance Committee Chairman Max Baucus (D-MT), for example, has pledged support for the elderly but he's also declared expanding a children's insurance program his committee's No. 1 priority.
Then there are the hospitals and doctors, some of the most formidable lobbying forces in Washington. Doctors in particular are in line for some of the harshest reimbursement cuts among providers.
Comfortable with quality
Nursing home advocates say they're fine with the prospect of bringing quality of care into the discussion.
By volunteering to go first for the federal government's quality initiative several years ago, they feel they essentially put their heads in the mouth of the lion and survived.
But there is still plenty of reason for concern.
"The thing that bothers us the most is the extent to which the administration proposed these (cuts)," Hebert explained. "It might create cover to people who don't want to do these things, but when push comes to shove late in the game, you might see them surface."
That's why we're likely to hear a lot more noise before budget issues are resolved this time around.

Pay cut for performance

As outlined in the president's 2008 budget proposal
- Zero update for skilled nursing facilities (SNFs) and inpatient rehabilitation facilities (IRFs) in 2008 and then a 0.65% annual decrease through 2012
- Update factor cut for inpatient and outpatient hospitals, hospices and ambulance services by 0.65% annually starting in fiscal 2008
- Zero update for home health agencies in 2008 through 2012 and a 0.65% decrease to the update each year thereafter

Physician fee schedule
-Would allow planned 10% cut to take effect in 2008

The president's proposal can be seen at http://www.hhs.gov/budget/08budget/2008BudgetInBrief.pdf.