H. R. 2015, the Balanced Budget Act of 1997, called for $115 billion in cuts from Medicare and $14 billion in cuts from Medicaid over a five year period (Highlights 2). The cuts in Medicare and Medicaid detailed reimbursement changes on health care providers, hospitals, physicians, nursing facilities and support staff. This Act has changed health care for many. For example, it included new coverage for preventive health care procedur5es like annual mammograms, pap smears, diabetes, and prostate and colorectal screenings. It also mandated new payments systems for Medicare skilled nursing facilities and home health agencies. However, as U.S. Rep. John Spratt (D-SC) said of these changes to the South Carolina Hospital Association in 1998 “I know these reductions are not the sort of thing to make hospital executives stand and cheer” (Remarks 3).
Hospitals were sent scrambling after the passage of the Act in order to offset potential income losses. For example, disproportionate share hospital (DHS) payments will be lowered by 5% in 2002, a potential loss to hospitals in Missouri alone of $60 million, while “supplemental bad debt payments—from people defaulting on their share of medical care—are also being reduced, from 75 percent reimbursement in fiscal 1998 to 55 percent in 2000 and beyond” (Kast 07B). The act also increases the number of people who are eligible for Medicaid. When Medicaid formulas for calculating copayments and deductibles are used, it means that hospitals will see more patients while receiving less dollars on top of a reduced reimbursement rate (Medicaid copayments and deductibles are typically lowed than Medicare).
All of these changes and others that the Act mandates have created the need for hospital executives to devise methods to help offset bad debt risk and to figure out how to maintain current income levels in light of the changes. T
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