Hospitals balk at Bush health plan

President Bush was expected to touch on his healthcare reform proposal during last night’s State of the Union address, but before he could share his vision with the nation, the hospital lobby issued a resounding rejection of one of the plan’s key components.

The Bush administration has floated a plan to finance new state-based health insurance programs partially by redirecting an existing stream of federal money that now compensates hospitals for treating people without coverage.

In a Monday afternoon briefing with reporters, Health and Human Services (HHS) Secretary Mike Leavitt emphasized that the federal portion of the plan could draw from a variety of funding sources, but hospital-industry representatives expressed displeasure at the possibility that a financing stream they highly value would be used.

“There are many places in the federal budget where we support institutions rather than support people,” Leavitt said. An HHS spokeswoman estimated the combined value of these funding sources at about $30 billion a year.

Leavitt emphasized that the funding sources would be determined on a state-by-state basis, depending on how governors and legislatures proposed establishing federally approved and supported health coverage schemes.

Despite such assurances, hospital lobbyists said the administration’s plan could burden their industry.

In addition to being paid by the federal government to treat patients enrolled in  Medicare, Medicaid and other programs, hospitals receive special payments designed to compensate for bills unpaid by uninsured patients, who are legally entitled to hospital treatment.

Both Medicare and Medicaid make such payments through their disproportionate share hospital (DSH) programs to facilities that provide a higher-than-average amount of charity or uncompensated care.

Although supportive of the goal of universal health-insurance coverage, one hospital lobbyist cautioned against reducing the amount of money dedicated to the DSH programs until that goal is achieved.

“It is premature now to cut the DSH funds for the purpose of helping the states and the Americans who don’t have insurance,” said Steve Speil, the senior vice president for health finance and policy at the Federation of American Hospitals.

The executive director of the National Association of Public Hospitals and Health Systems, Chris Burch, agreed. “We’re distressed the coverage expansion would be paid for by taking [money] away from providers that have cared for the uninsured,” she said. Public hospitals “would be quite distressed if this program would be cut to pay for another program.”

“The administration is right on two things, wrong on one,” Speil said. “States need help; Americans need insurance. But it makes no sense to cut hospitals, who are already losing money on Medicaid and Medicare, to finance those needs.” The federation represents private, investor-owned hospital companies.

“Universal coverage …  is certainly something we would support. The question [is] where the money comes from … and how we get there in transition,” the executive vice president of the Association of American Medical Colleges, Dick Knapp, said.

Representatives of public and research hospitals said changing the DSH programs to finance expanded insurance coverage would be particularly burdensome to their facilities. Publicly owned hospitals and hospitals at medical schools provide more charity care than other facilities, they said.

“You’re always going to need a safety net in this country,” Burch said. “Nothing being proposed now is anywhere near universal coverage,” which means that hospitals would still have to treat patients who lack the ability to pay, she added.

“While our members are only 6 percent of hospitals,” Knapp said, “they provide [about] 50 percent of all the charity or uncompensated care in the country.”

The administration is promoting a plan with two major components. The first would change tax law in a way that would cap the exemption for health benefits provided through employers in order to provide a new exemption for people who buy health insurance from other sources.

The second component, which would require some new or redirected federal spending, would encourage states to concoct their own healthcare reforms that would guarantee access to low-cost, basic health insurance plans and include financial assistance for low-income people.

So far, the administration’s healthcare proposals have been received coolly by most from K Street and Capitol Hill who have spoken publicly about the plan.

Key congressional Democrats such as Rep. Pete Stark (Calif.) and Sen. Edward Kennedy (Mass.) have rejected the administration’s proposals. Senate Finance Committee Chairman Max Baucus (D-Mont.) struck a conciliatory tone in his initial comment on the plan, saying he would be willing to discuss the administration’s ideas.

In addition, some organizations representing employers and organized labor — which have begun joining forces to promote a national debate on healthcare coverage — have reacted with skepticism to the plan.