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More Medicare Reform, More Struggling Hospitals

Karen Minich-Pourshadi, for HealthLeaders Media, September 12, 2011

With Medicare and Medicaid already caught in the cross hairs of the debt ceiling crisis, it now seems that putting Americans back to work has the potential to put some hospitals out of business, and to force an even swifter consolidation of the industry.

President Barack Obama’s $447 billion American Jobs Act bill, which he urges Congress to pass “right away” in order to “jolt an economy that has stalled,” takes aim at Medicare and Medicaid. "Now, I realize there are some in my party who don’t think we should make any changes at all to Medicare and Medicaid, and I understand their concerns," Obama said last week. "But here’s the truth: Millions of Americans rely on Medicare in their retirement. And millions more will do so in the future. They pay for this benefit during their working years. They earn it. But with an aging population and rising health care costs, we are spending too fast to sustain the program. And if we don’t gradually reform the system while protecting current beneficiaries, it won’t be there when future retirees need it. We have to reform Medicare to strengthen it."

The battle cry for Medicare and Medicaid reform is one that politicians have been shouting for years, and that is unlikely to change with the 2012 election on the horizon. In fact, Medicare and Medicaid rates have been reduced and then reinstated at the eleventh hour by lawmakers for years. What has put this political pawn into real jeopardy in recent months is the debt ceiling crisis, high unemployment nationwide—with benefits about to expire—and an economy that continues to show few signs of rebound.

As healthcare leaders know well, the Patient Protection and Affordable Care Act already calls for Medicare and Medicaid reimbursement cuts, while the recent debt ceiling crisis brought the possibility of even steeper rate reductions. Hospitals and health systems have already braced for the first round of rate reductions, but at organizations with payer mixes dominated by Medicare and Medicaid, further reductions would increase charity care and bad debt to such a degree that some facilities could be left teetering on the financial edge.

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