Federal government is beginning to tax our patients

The Senate Finance Committee (SFC) released an options paper available here to explore ways to fund healthcare reform. It includes a wide variety of changes in the Medicare and Medicaid programs, from reducing payment updates to different health care sectors to reducing geographic variations in spending. The panel is taking the approach that just about everybody is going to have to take a hit to fund expansion of coverage.

The committee will conduct a “walk-through” of the options at a closed-door meeting Wednesday, May 20, 2009. The panel is also looking at new taxes on everything from employer’s healthcare benefits and nonprofit hospitals to alcohol and sweetened beverages, among many approaches to funding a package that could cost well over $1 trillion over 10 years.

The American Hospital Association (AHA) has been protesting some of the proposed changes in Medicare payments to hospitals. The hospital association said that implementation of the committee’s provisions on value-based purchasing, payment “bundling” and readmissions “would result in payment cuts to an already underfunded Medicare payment system.” While the AHA is certainly looking out for the interests of its members, there is a lot ot their argument.

The SFC will consider changes in Medicare out-of-pocket spending requirements to protect beneficiaries against catastrophic expense while at the same time require some minimal level of cost-sharing so that supplemental “Medigap” policies do not block beneficiaries from some sensitivity to the costs of using multiple services.

The options paper says that market basket adjustments for certain fee-for-service providers may be required to be adjusted “by some or all of the expected productivity gains as a way to improve the accuracy of Medicare payments.”

Cuts in Medicare payments for imaging are also on the table. The current method assumes that imaging machines are operated 50 percent of the time — but assuming a higher use rate would lower payments for advanced imaging technology while raising payments for other types of physician services. Another option would be to establish an expert panel to help the Centers for Medicare and Medicaid Services adjust payments “for potentially misvalued physician services,” the options paper states.

The paper also contemplates changes in funding for graduate medical education and “DSH” payments, meant to compensate hospitals that treat a disproportionate share of poor people. In fiscal 2009, Medicare DSH spending will total $10.1 billion and $9.1 billion in Medicaid, the paper notes.

The SFC report also suggests limiting the amount that workers can contribute to flexible spending accounts -- tax-free accounts workers use to pay for prescriptions and other medical expenses -- or possibly eliminating them altogether. Nonprofit hospitals that don't provide enough charitable care or meet other requirements would pay new taxes.

One thing that is important to remember in all of the options on funding is that hospitals and healthcare plans don’t pay taxes – people do. Any tax is ultimately paid by real living, breathing humans. So a tax on hospitals and healthcare providers is really a tax on patients. And the politicians already are beginning to tax our patience…