Hospital Deal Could Come Wednesday

The hospital industry, the White House and the Senate Finance Committee are poised to announce a deal under which the industry would agree to federal funding cuts of about $155 billion over the next decade to help pay for a health system overhaul, according to people familiar with the talks.

The deal could be announced as soon as Wednesday by Vice President Joseph Biden. A critical feature is an agreement on phasing in Medicare and Medicaid cuts so that they’d take effect as uninsured patients gain coverage. The expanded coverage would provide additional revenues to hospitals that are struggling with big losses resulting partly from rising numbers of people without insurance.

Hospitals, which have been hit hard by the recession, have been objecting to President Barack Obama’s proposals to slash federal payments to hospitals by more than $220 billion over 10 years. Under the deal with the White House and Senate Democrats, hospitals have agreed to smaller cuts–and gotten assurances that those reductions would be timed to coincide with expanded insurance coverage.

However, the pact doesn’t prevent the House from demanding bigger cuts, according to people who are familiar with the negotiations. Still, industry insiders are hoping that, by reaching agreement and creating good will with the White House and Senate Democrats, they’ll have influential allies arguing on their behalf when the House and Senate meet in a conference committee this fall.

A hospital agreement would boost Obama’s drive for reform legislation by addressing some of the biggest concerns of hospitals, one of the most influential players in the health care industry. In addition, a pact would provide more money to the administration and Congress to cover the uninsured. Moreover, the deal would come at a crucial time–just as members of the House and Senate begin a sprint to get legislation through both chambers before the start of the August recess.

A hospital agreement would follow a recently announced deal involving the pharmaceutical industry, the White House and the Senate Finance Committee. Under the deal, which was endorsed by the powerful seniors’ group, AARP, the Pharmaceutical Research and Manufacturers of America said it would spend $80 billion over 10 years to expand the Medicare drug program and help defray the cost of an overhaul.

The hospital negotiations involve the American Hospital Association; the Catholic Health Association; the Federation of American Hospitals; administration officials, and congressional staff. The hospital associations and the White House declined comment on the potential deal.

Hospital costs make up the biggest slice of national health expenditures–about 31 percent of the $2 trillion spent annually. That’s why hospitals are a target for Obama and Democrats searching for ways to finance reform legislation.

Beyond the timing of payment cuts, hospitals are concerned about proposals to expand the powers of a panel that advises Congress on payment rates for hospitals. Under an Obama proposal, the Medicare Payment Advisory Commission would set the rates itself (though Congress could overrule it). Such an arrangement would make it harder for the industry to effectively lobby against payment reductions.

Hospitals also have raised concerns about proposals to create a government-run insurance plan to compete with private insurers. They want to make sure that such a plan doesn’t link its payment rates to Medicare rates, which are lower than those paid by private insurers.