*This is an archive page. The links are no longer being updated.
1993.03.26 :  Medicare Hospital Payment Rates

Contact:  Anne Verano (202) 690-6145
March 26, 1993

       HHS Secretary Donna E. Shalala today recommended to
Congress that Medicare payment rates for inpatient hospital care
be increased by 3.33 percent for urban hospitals and 4.83 percent
for rural hospitals in calendar year 1994.
       "These recommendations fairly address the need to meet
rising hospital costs for treating Medicare patients," Secretary
Shalala said.  "At the same time, they achieve savings proposed
by President Clinton to reduce the federal budget deficit."
       Secretary Shalala explained that "Medicare spending is
among the fastest growing expenditures in the federal budget. 
Our proposals for the annual payment update will encourage
hospitals to accomplish more effective control of their costs,
which are increasing at more than double the rate of general
inflation.
       "Restraining the growth of health care costs is a
responsibility that must be shared by all sectors of the health
care industry," Secretary Shalala said.  "Health care cost
increases are imposing an excessive burden on the economy, with
effects on every American family."
       The proposals Secretary Shalala submitted to Congress
would
save nearly $1.7 billion in Medicare payments to hospitals in
fiscal year 1994.  Even then, Medicare expenditures for hospital
inpatient care would increase 7.6 percent in FY 1994 to reach $80
billion.
       The proposals are consistent with those recommended by the
Prospective Payment Assessment Commission, an agency created by
Congress to oversee the Medicare Prospective Payment System and
make recommendations to Congress for annual updates. 
       The PPS system includes approximately 5,400 hospitals,
including 2,900 urban and 2,500 rural facilities.  The PPS system
pays hospitals predetermined rates based on diagnoses.
       The recommendations are based on the annual increase in
the  "market basket index," which the Office of Management and
Budget estimates at 4.5 percent for 1994.  The index is an
estimate of the inflation rate for the costs of goods and
services used by hospitals.
       The savings would be achieved by limiting the average PPS
update to the market basket rate of increase minus 1 percentage
point and by delaying the update.  The delay would move the
update from a fiscal year to a calendar year schedule, making it
effective Jan. 1, 1994, instead of Oct. 1, *This is an archive page. The links are no longer being updated.
1993.

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EDITOR'S NOTE: The Health Care Financing Administration, an
agency of the U.S. Department of Health and Human Services,
directs the Medicare and Medicaid programs, which help pay the
medical bills of 67 million Americans.  HCFA's estimated fiscal
year 1993 expenditures are almost $230 billion.