Hospitals feel pinch as costs go up and federal funds go down

If your hospital administrators have harried looks these days, it's because they're feeling the pinch again. Things were not expected to get better in February when the President sent his new budget proposals to Congress for the next fiscal year, beginning Oct 1. Experts ex- pected to see more cuts in health and social programs.

The economy has shown no mercy on the hospital industry. Although inflation moderated somewhat for most of us last year, hospital costs rose 18.8%. In 1980, the average cost for a 7.6-day stay in the hospital was $1,851. The same care would have cost only $608 in 1970. These increases hit the government hard, as it has to shell out more money to reimburse hos- pitals for care given under the Medicare and Medicaid programs.

Medicare and Medicaid are swallowing up so much money, they are taking away from other health programs, Rep Henry Waxman (D-Calif) noted. He is chairman of one of the House's key health panels. Waxman also be- lieves hospitals haven't done enough to curb costs voluntarily.

The hospital industry responds by saying the cost hikes show "real growth" in the ser- vices patients are receiving. At a congres- sional hearing this winter, J Alexander Mc- Mahon, president of the American Hospital Association, said 14% of the 18.8% increase was due to inflation. The rest he attributed to such factors as caring for an expanding elderly population.

s Legislation

No matter what is to blame, you can be sure Congress and the President will be keenly in- terested in what hospitals around the nation are doing to bring the situation under control. Wage increases will not be easy to come by, even though you may believe that would have more effect than anything else on the nursing shortage.

The federal government is slowly nibbling away at funds for nurse training, as with money for other health and social programs. The Nurse Training Act is now funded under the continuing resolution Congress passed Dec 15, which extends through the end of March. This is a measure lawmakers take when they cannot agree on a final appropriations bill.

The continuing resolution provides for the lower of two amounts-either the funds en- acted for fiscal year 1981 ($80.2 million) or the amount passed by the House for fiscal year 1982 ($54.4 million). From this lower amount, Congress then subtracted another 4% across-the-board when it passed the De- cember resolution. Currently, the nursing edu- cation programs have about $50 million.

"Nothing is certain at this point" about what will happen the rest of the fiscal year, observed Virginia Bauknecht of the American Nurses' Association Washington office. Congress may extend the continuing resolution through Oct 1, when the new budget year begins. Or it may pass final appropriations bills. In either case, amounts could change.

Meanwhile, as the new 1983 budget cycle begins, things are not expected to improve. Bauknecht said the President might again come forth with a proposal of $13 million for nurse training-the amount he suggested to Congress last year.

778 AORN Journal, March 1982, Vol35, No 4

“Competition” will be the buzz word in health legislation this year. It refers to ways of controlling rising health costs by reforming health insurance. Concepts have been kicked around since Reagan took office last year. In January, the President planned to reveal a concrete proposal. Hints of what it might con- tain came from a report he received in De- cember. The report was compiled by a task force in the US Department of Health and Human Services.

The task force outlined options for changes in both private health insurance and the gov- ernment’s Medicare program. Three options for the private sector are:

0 limit the amount employers can deduct from their taxes for contributions they make to their employees’ health insurance. Currently, there is no limit on the deduction. This encour- ages your employer to offer a good health in- surance plan, but it does not encourage him to make sure it is economical. It also keeps money out of the federal treasury.

0 encourage employers to offer a choice Qf health plans. Employers could get tax credits if they provided for a plan with at least 20% coin- surance and a health maintenance organiza- tion, for example. Then employers would make the same amount of premium payment for each employee for his chosen plan. If an em- ployee chooses a plan that would cost his company less than the premium contribution, he could pocket the difference, tax free.

0 raise excise taxes on alcohol and ciga- rettes to offset revenue the government would lose through the tax credits and tax rebates described above.

Incentives for reducing costs to Medicare, the government’s health insurance program for the elderly, would be improved. Currently, Medicare pays for all of your hospital care dur- ing the first 60 days of your benefit period, except for a deductible. From day 61 to day 90, however, you must pay part of the costs. You must also pay part of the costs for “reserve days,” which are available after the initial ben- efit period expires. There is no limit on how much you might have to pay if you have a long “catastrophic” illness.

The task force concluded that these Medi- care rules should be changed because they place afinancial burden on patients late in their illness, when they can least afford it and when

it is less likely to affect physicians’ decisions. The group suggested two alternatives for Med- icare:

0 have a 10% coinsurance on all hospital days, beginning with the first day, and limit a patient’s out-of-pocket costs to $2,500 per year under both Part A (hospital insurance) and Part B (supplementary medical insur- ance).

have a 10% coinsurance on all hospital days, with a $1,000 limit on out-of-pocket ex- penses per year under Part A. There would be no limit on Part B cost-sharing.

A system of “vouchers” would encourage Medicare clients to enroll in private health plans instead. The government would offer to pay a substantial amount of the premiums. The plan would be optional, and persons could re- turn to Medicare during an annual open en- rollment period.

These are only suggestions, and the Presi- dent may not go along with all of them. Another task force, with members from outside the government, came up with a somewhat differ- ent proposal several weeks later.

Although observers thought more details might emerge during the President’s State of the Union address Jan 26, he did not discuss the competition plan. He did say he would pro- pose having the federal government take over all responsibility for the Medicaid program, which provides health benefits for eligible low income people and certain other groups. Medicaid is now a program shared by the states and federal government. On the other hand, he said he would ask to have some 40 other federal programs turned over to the states over a period of time. Plans for more federal taxes are apparently out the window because the President has steadfastly refused to make such a move.

Patricia Patterson Associate Editor

782 AORN Journal, March 1982, Val 35, No 4