Pain of health care cuts will be spread around industry

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Hospitals that provide a substantial amount of uninsured and uncompensated care — and other safety net providers — could experience serious financial problems as a result of the health care reforms being debated by Congress.

House Bill 3200 cuts payments for uninsured or uncompensated care by 50 percent starting during 2017.

“There are about 150 hospitals that receive uncompensated care reimbursement in excess of 40 percent of their budgets,” said Brad Bowman, director of the PricewaterhouseCooper’s health industries advisory practice. “In the future, charity care will be offset by the upswing in insurance.”

But reductions in payments aren’t the only problems facing safety net clinics and hospitals.

“The current (Medicare) fee-for-service system is going to change,” Bowman said. “Hospitals with high readmissions would see rates cut up to 20 percent. Payments for expensive imaging treatments — considered to be overused in defensive medicine — would also be cut.”

Automatic increases in Medicare payments because of inflation would disappear under some versions of reform bills. Those cuts could be as high as $106 billion.

The pharmaceutical industry also is going to face some changes — in some cases, getting less money for drugs purchased through the Medicare system.

The health care reform bill sponsored by Sen. Max Baucus might lower drug company revenue by $90 billion because it introduces new fees. The plan also provides coverage for the Medicare D “doughnut hole,” in which beneficiaries find themselves suddenly without drug coverage.

Under House Bill 3200, drug companies must offer a 50 percent discount off negotiated rates when beneficiaries enter the “doughnut hole” in part D.

Medical device companies would face $40 billion in new fees, and payments to drug manufactures would be reduced by $45 billion.

Other big hits to the pharmaceutical industry: over-the-counter drugs would no longer be covered in a health savings account, and a new excise tax of $2.3 billion for drugs and $4 billion for medical devices would be imposed under the different bills.

But providers and pharmaceutical companies aren’t the only ones who would feel the pain in this new reform scenario. Insurance companies also will face a new way of doing business.

Health plans under the Baucus bill would take a $458 billion hit — including taxes on high benefit plans and reduction in Medicare Advantage payments.

“Changes in Medicare Advantage means increased focus on cost reduction,” Bowman said. “And some companies will exit certain markets. Enrollments might drop in plans cut extra benefits or raise out of pockets costs — as insurers pass the costs to consumers, some will drop the program.”