Skip to main content

The DataGen Download: Dissecting Medicare Cuts

Another round of major healthcare financial cuts is possible—and their impact could be devastating.

As healthcare policymakers and analysts try to mitigate the high cost of healthcare in the United States, payment reform is already making an impact on the way provider organizations do business. DataGen recently released projections revealing the impact of cuts made in Medicare payments to hospitals and hospital systems across the nation over the last 16 years.

These cuts were partially offset by the coverage increases under the Affordable Care Act (ACA). As the new administration turns its attention to healthcare, however, there are more potential cuts on the table. If these cuts are enacted—and if done so while the coverage expansion provided by the ACA is repealed or changed—healthcare organizations face a major risk of a massive decrease in funding.

ENACTED CUTS

Nationally, of the funds allocated from Medicare to reimburse providers for the care of the elderly and disabled, 14% has already been cut—amounting to more than $500 billion in reductions between 2010 and 2026. These cuts can broadly be broken down into three categories: legislative, regulatory, and quality-based payment reform.

More than 40% of these cuts—$207 billion in all—include reductions in the cost of living adjustments that providers need to keep up with the increasing cost of providing care.

These particular reductions—generally called “ACA marketbasket cuts”—were initially intended to help pay for coverage expansion under ACA.

Medicare Disproportionate Share Hospital (DSH) payments, which represent 12%—$62.1 billion, were cut with the expectation that expanded coverage would ease some of the burden of caring for these vulnerable populations, representing payments to providers serving a higher mix of poor, uninsured, and underinsured patients.

PROPOSED CUTS

DataGen also released information on the potential impact of multiple additional cuts under consideration but not yet enacted. The ever-increasing national debt, combined with the fact that healthcare makes up over 25% of federal spending, leaves little room for doubt that at least some of these proposals for spending cuts will be adopted.

Hospitals that train medical residents face the possibility of $18.2 billion in reductions for that critical function over the next ten years—an issue that’s especially daunting with looming doctor shortages creating additional anxiety. While outpatient services have represented an increasing proportion of revenue as hospitals are pushed to provide more care without admitting patients, payments for those services could be cut by up to $18.7 billion.

Rural hospitals that provide care for patients who don’t have access to another hospital face potential reductions of up to $35.8 billion. In total, these and other proposals could add another $150 billion over the next ten years to the reductions already in place.

The healthcare community has already absorbed $500 billion in cuts—and the proposed cuts are making many providers wonder where it will ever stop. If coverage expansion goes away, as the initial replacement for ACA proposed, providers do have a real reason to worry about their financial sustainability. That doesn’t mean there’s nothing to be done about it, though.

Providers have already been lobbying their congressional representatives heavily to express the impact these cuts will have on day-to-day operations. While this effort seems to have gotten some traction, it’s important to keep the pressure on. We at DataGen believe that the new administration is beginning to understand the interconnected nature of healthcare policy and financial regulation—and is seeing that these cuts will cause reductions in the labor force, negatively impacting communities, employees, and patients. 

Click here for your copy of the DataGen Download: Dissecting Medicare Cuts. Contact DataGen to learn more about the impact these proposed cuts will have.

Also, visit our Resources page and follow us on LinkedIn for more learning on healthcare payment reform.

Popular posts from this blog

What is the purpose of a Community Health Assessment?

The purpose of a Community Health Assessment goes beyond achieving state requirements or receiving accreditation. If you're a local health department, you may be interested in finding ways to push your CHA data further to more easily identify ways to improve health equity and community outcomes. Focusing only on submission can be counter-productive to the community outcomes you want to achieve. In this blog, we'll give you an overview of the importance of conducting a CHA. Plus, we'll provide you with key information you can use to reset your workflow and rethink your processes. Why you need to complete a Community Health Assessment Certain states require a CHA because it provides a systematic review of a community's health status and essential data and information regarding the health of the community. Specifically, the New York state Department of Health writes, "Community health assessment is a fundamental tool of public health practice. Its aim is to describe

BPCIA: 4 fast facts for a successful Model Year 7 kickoff

Participation in Model Year 7 launched on Jan. 1, 2024, with the first few months being a critical time for providers. New Bundled Payments for Care Improvement Advanced Model (BPCIA) participants got their footing, and continuing participants were able to change their clinical episode service line groups for the first time since 2020.  If you’re a provider participating in this model, read on for a BPCIA refresher and four fast facts for starting MY7 right. We’ll also cover core analytics activities to support your clinical and operational success.   4 Fast facts on BPCIA Model Year 7  1.   Focus on clinical episodes and episode volume  Before MY7 began, providers used historic baseline data provided by CMS to evaluate which CESLGs they would go at risk for, ensuring there would be sufficient episode volume. Large episode volume (100 episodes/year or more) reduces random variation and helps protect providers from financial risk associated with outlier Medicare episode spend.    During