On June 20, 2000, President Clinton proposed a five-year, $21 billion legislative package of relief for health care providers from some of the Medicare and Medicaid cuts contained in the Balanced Budget Act of 1997 (BBA). "When we passed the Balanced Budget Act of ' 97," the President declared, "we did not provide adequate funding for the medical providers of the country." His package includes $9.2 billion in specific, short-term relief measures for hospitals, including teaching and disproportionate share hospitals (DSH), skilled nursing facilities (SNFs), home health care providers, and Medicare+Choice plans. The remaining $11.8 billion in the President's plan, including any permanent relief, would be negotiated with Congress over the next few months. In addition, the President endorsed Vice President Al Gore's proposal to protect Medicare surpluses by placing them in a so-called lock-box. Under this proposal, Medicare surpluses could only be used for Medicare expenses or, if unused, would automatically help pay down the Federal debt. Currently, Medicare surpluses are used to help finance the general operations of the Federal government. That same day, the House of Representatives passed a similar "lock-box" proposal.

Specifics: The President's plan would relieve hospitals and continuing care providers from BBA cuts in 2001 by repealing Medicare market basket update cuts for hospitals, nursing homes, and home health care providers in 2001; repealing the further cut in the indirect medical education (IME) adjustment for teaching hospitals scheduled for October 1, 2001; repealing the 2001 3% cut in Medicare DSH payments; delaying the imposition of therapy caps under the SNF prospective payment plan by one year; and delaying the 15% cut in home health care payment rates for one more year. These payment changes will also help Medicare+Choice plans because fee-for-service payment increases for providers translate into higher Medicare managed care premiums. As mentioned, the President has identified an additional pool of funds for further, unspecified BBA relief. GNYHA's estimate of the fiscal impact of the President's market basket, IME, and DSH proposals is shown in the table at right.

GNYHA's Reaction: GNYHA President Kenneth E. Raske praised the President and Vice President for their Medicare proposals. "I am extremely grateful to President Clinton for proposing an important first step to strengthen our nation's health care system and to improve the long-term financial outlook of the Medicare program," Mr. Raske stated. Citing a June 17, 2000, article in the New York Times that chronicled the increasingly difficult decisions hospitals must make due to financial stress, including the elimination of thousands of positions, Mr. Raske said, "These proposals, along with proposals to provide outpatient prescription drug coverage for seniors, will go a long way toward ensuring that the health care system Americans rely upon will be strengthened and improved for seniors today and tomorrow."

Next Steps: Congress now has to be convinced to approve BBA relief legislation that contains the President's proposals and provides permanent relief for GNYHA member hospitals and continuing care members. Specifically, GNYHA supports using the President's $11.8 billion pool, and other funds that may be identified by Congress and the President during negotiations, to enact S.2395/H.R.4239 (sponsored by Senator Daniel Patrick Moynihan, Senator Charles Schumer, and Congressman Charles Rangel), which would permanently protect teaching hospitals from further cuts in the IME adjustment; to enact H.R. 3580, sponsored by Congresswoman Nita Lowey and Congressman Jack Quinn, which would provide full market basket updates for hospitals in 2001 and 2002; and proposals to improve the SNF and home health prospective payment systems. Last week, the House Ways and Means Committee approved legislation to provide coverage for outpatient prescription drugs for senior citizens that provided limited relief for Medicare+Choice plans, but that contained no further BBA relief for health care providers.

GNYHA Estimate of the Fiscal Impact of the Administration's FY 2001 BBA Relief Proposal ($ in millions)
	Full Market Basket Increase for FY 2001	IME Adjustment at 6.5% for FY 2001	DSH at 100% for FY 2001	Total
FY 2001 Fiscal Impact
New York City	$34	$21	$16	$71
GNYHA Members	$44	$25	$17	$86
New York State	$68	$30	$20	$118
United States	$795	$166	$144	$1,105
5-Year Fiscal Impact
New York City	$177	$21	$16	$214
GNYHA Members	$229	$25	$17	$271
New York State	$356	$30	$20	$405
United States	$4,155	$166	$144	$4,465

Source: HCFA's FY 2000 Impact File.