Home Health Care Effort underway to help hospitals by suspending Medicare sequestration

Effort underway to help hospitals by suspending Medicare sequestration

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Amid a pandemic that has decimated hospital finances, providers are pushing Congress to increase Medicare payments by pausing sequestration until the end of the year.

Their efforts appear to be working, with the House passing a bill Friday to eliminate the 2% Medicare sequester cuts, and the Senate is expected to vote on its own version of a bill to pause sequestration this week.

But what is Medicare sequestration exactly and why are providers fighting to suspend it?

What are the Medicare sequester cuts?
The history of Medicare sequestration goes back to the beginning of this decade.

The Budget Control Act of 2011 mandated federal budget cuts totaling more than $1 trillion over nine years, including 2% cuts annually to all Medicare payments, said Stephanie Kennan, senior vice president with McGuireWoods Consulting’s federal public affairs team, in an email.

Then the Covid-19 pandemic hit, and providers’ financial health took a nosedive.

To help struggling hospitals, legislators included relief from Medicare sequestration cuts in the Coronavirus Aid, Relief, and Economic Security Act, signed into law on March 27, 2020.

But the relief only extends until March 31 of this year.

Why providers want the suspension to continue
The once-in-a-century public health crisis has hit hospitals hard, and recovery is expected to take a long time.

Hospitals are expected to lose between $53 billion and $122 billion this year, according to a recent report by Kaufman Hall and the American Hospital Association.

A second report by the organizations shows that by the end of 2021, hospital margins could be 10% to 80% below pre-pandemic levels and half of U.S. hospitals could have negative margins.

Suspending the sequester cuts would put added funding in providers’ coffers as they continue to fight the pandemic, they argued.

“This funding would allow for continued support of providers’ Covid-19-related additional expenses due to activities such as purchasing supplies and equipment, standing up emergency testing centers and the construction and retrofitting of facilities,” said the American Hospital Association and other national provider groups in a March 11 letter to lawmakers.

Suspending the cuts would add $36 billion to Medicare spending in 2022, according to a letter sent last month to Rep. Kevin McCarthy, R-California, the House minority leader, from the Congressional Budget Office.

Congressional action on sequestration
In a 246-175 vote, the U.S. House approved a bill that would eliminate the 2% sequester cuts until the end of the year. Further, the bill excludes the budgetary effects of the Statutory Pay-As-You-Go (PAYGO) Act of 2010.

The American Rescue Plan triggered the PAYGO anti-deficit provision, said McGuireWoods Consulting’s Kenan.

“PAYGO, or ‘pay as you go,’ requires Congress to offset deficit spending with automatic across-the-board cuts to the federal budget,” she said. “If Congress does not pass legislation creating an exemption, the law would require an additional 4% cut to Medicare reimbursement rates that would take effect in the fiscal year starting Oct. 1.”

Separate from the House bill, Sens. Jeanne Shaheen, D-New Hampshire, and Susan Collins, R-Maine, introduced the Medicare Sequester Relief Act in mid-March. If passed, this bill would prevent the sequester cuts from taking effect during the Covid-19 public health emergency.

The Senate bill only targets the sequester cuts, and not the additional 4% cuts linked to PAYGO, said Rick Pollack, president and CEO of the American Hospital Association, in a press call on Tuesday. But, for providers, the Medicare sequester cuts are more of an immediate priority.

“Now, that doesn’t mean that we didn’t support the House bill,” Pollack said. “It doesn’t mean that we won’t want to see that other piece of the PAYGO sequester ultimately dealt with before any damage would kick in as a result of that sequester. But what we’re also saying is that the priority needs to be on the Medicare sequester.”

Pollack expects the Senate to vote on the bill this week.

Photo: zimmytws, Getty Images

 

 

 

 

 

 

 

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