Health System could pay for Medicare cuts

Three pieces of legislation this week threaten major cuts for the Penn Health System's budget, but officials say the financial crisis the system suffered in 1998 and 1999 won't recur.

Federal legislation and proposed federal and state budgets would cut Medicare and Medicaid reimbursements to Penn by millions of dollars. Medicare offers health insurance for the elderly and disabled, while Medicaid is for low-income citizens.

The federal Deficit Reduction Act, which passed Wednesday after months of deliberation, will have a $5 to 6 million impact on the budget of the Health System, according to Health System CEO Ralph Muller.

Cuts made in 1997 had over 10 times that much impact on Penn's budget and contributed to hundreds of millions of dollars of losses over two years.

The budget that President Bush proposed on Monday, however, "would be much more substantial [than Wednesday's act] in terms of its effect on us," Muller said.

If the president's proposal passes unmodified, its impact on Penn could be up to $20 million, Muller estimated.

But he downplayed the risk of the proposal actually passing.

"I think that most of the cuts the president has recommended will not be put into legislation in the budget," Muller said. "There are many months between now and then."

Robert Field, a Penn adjunct professor and director of the Health Policy Program at the University of the Sciences in Philadelphia, agrees with Muller's assessment.

"Budget proposals usually don't look a lot like the final proposal that comes out," he said.

Pennsylvania Gov. Ed Rendell's Wednesday budget announcement would also impact Penn adversely if passed unaltered. Field called the proposal "similar to the bill that Congress passed."

The state budget proposal's projected impact on Penn is about $15 million, Muller said.

While all three reductions target hospitals, they don't single out academic medical centers for harsher treatment, which was one reason the 1997 Balanced Budget Act hit Penn so hard.

That change in approach may be in part due to Muller himself. He is a member of MedPAC, an advisory body established in 1997 by the same act. Muller said he has worked to get MedPAC "off that track."

"If we have to take a cut, we take it together. But don't target teaching hospitals," he said.

Field said that although the proposals don't specifically target teaching hospitals, such medical centers tend to be located in poorer, urban areas, which means they must treat more patients who can't afford care. When aid programs for those groups are cut, hospitals must absorb the shortfall, Field added.

The president's budget proposal recommends moving people off Medicaid while reducing benefits for those who remain in the program, according to Muller.

"It's kind of perverse to say that those who do more [low-income care] get cut," he said.

Penn's Health System currently provides nearly $50 million worth of care each year for which it is not paid, among the highest levels in the state.

Muller added that the Health System will absorb the shock if it must. This "cuts our finances but it doesn't cut our programs. We won't cut the programs," he said.

Shrinking funds - Deficit Reduction Act will cost Health System $5-6 million - Proposed federal budget would take another $15-20 million - Proposed state budget could bring $15 million more in extra costs

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