Provision in Iraq War Supplemental Bill Protects Hospitals for One Year
Last week, pursuant to President George Bush's proposed budget for the Federal fiscal year starting October 2007, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule that would eliminate Federal Medicaid matching payments for the costs of graduate medical education (GME). According to the proposed rule, the Federal Medicaid statute alleges that Federal financial participation (FFP) is available to the states only for "a percentage of amounts expended ... for medical assistance under the state plan," and does not explicitly provide for the payment of GME. In particular, the proposed rule states that "GME is not a health service that is included in the authorized coverage package," nor is GME recognized as "a component of the cost of Medicaid inpatient and outpatient hospital services." Therefore, according to the proposed rule, states may not receive FFP for these costs.         

The proposed rule thus would specify that states may not include GME payments in a Medicaid State Plan, including payments through the fee-for-service system as well as separate GME payments for Medicaid managed care patients that are authorized under a specific section of current regulations. Such pass-through payments for Medicaid managed care enrollees are not permitted for other purposes. In addition, the proposed rule would change the calculation of the "upper payment limit" (UPL) in a way that would lower the amounts that states could pay to teaching hospitals. Currently, states may make Medicaid payments to providers up to a calculation of the amount that Medicare would have paid for the same service. The UPL calculation currently includes Medicare payments for direct GME and indirect medical education (IME) costs. The proposed rule would eliminate direct GME payments from the calculation of the amount Medicare would have paid. The rule would leave IME in the UPL calculation because IME is defined as a payment for direct patient care costs.

In the context of a discussion of Medicare, the proposed rule references studies from the 1980s concluding that the nation had a surplus of physicians. The proposed rule ignores the numerous recent independent studies, including one performed for the Federal Council on GME, that have identified an impending shortage of physicians and called on all parties to ensure that medical education in all its forms is supported.         

CMS estimates a savings from the proposed rule of just $140 million in Federal fiscal year (FFY) 2008, growing to $460 million in FFY 2012, but notes that it has no accurate way of identifying precisely how much states may be paying in Medicaid GME each year. This is a severe underestimate of the impact. In New York alone, the value of hospital payments with a GME label is $1.2 billion per year (gross), half of which would be placed at risk were the proposed rule to be adopted. 

Congressional Activity: A provision that would block, for one year, the implementation of the GME rule and the proposed intergovernmental transfer rule has been included in the revised Iraq War Supplemental conference agreement that was passed by the House and Senate on May 24. Without statutory language, the implementation of those rules would result in $4.75 billion in losses to New York's teaching and public hospitals over the next five years alone.         

GNYHA—with the American Hospital Association, the Association of American Medical Colleges (AAMC), the National Association of Public Hospitals, the Healthcare Association of New York State, HHC, and the Washington offices of Mayor Michael Bloomberg and Governor Eliot Spitzer-has been aggressively advocating for a moratorium and is very pleased that this critical provision was included. GNYHA has been working closely with the New York delegation to underscore the importance of this issue. Additionally, Continuum Health Partners CEO Stanley Brezenoff, on behalf of GNYHA and the AAMC, highlighted this issue in his testimony before a U.S. House Ways and Means Health Subcommittee hearing on May 16.        

President Bush is expected to sign the revised version of the agreement into law.         

The inclusion of this language would not have been possible without the strong support and advocacy of the New York Congressional Delegation and, in particular, Chairman Charles Rangel, as well as NYS's four Appropriations Committee members: Reps. Nita Lowey, Jose Serrano, Maurice Hinchey, and James Walsh. GNYHA is most appreciative of their efforts.