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The Balanced Budget Refinement Act

The Balanced Budget Refinement Act of 1999 restored funding to the Medicare and Medicaid systems that were eliminated by the Balanced Budget Act of 1997. The act restored an estimated $17 billion over five years and $27 billion over 10 years to Medicare and Medicaid providers at hospitals, hospice, home health care, outpatient services and education facilities as well as to the state children's health insurance program.

  1. History

    • The Balanced Budget Act of 1997 helped reduce the deficit and balance the federal budget, according to the Public Sector Consultants research firm. The act included reductions to the nation's Medicare program that provides low cost health care insurance primarily to people 65 years of age or older and the Medicaid program that provides free health care insurance to low income individuals and families. The reductions in funding to Medicare and Medicaid were more than estimated, however, so the new act was passed to restore some of the services that were cut.

    Changes to the Outpatient Prospective Payment System

    • The new act canceled a proposed 5.7 percent drop in funding to the outpatient prospective payment system. The system, commonly known as OPPS, was established in 1997 and pays hospitals to provide certain outpatient services to people with Medicare. Canceling the reduction restored an estimated $3.9 billion to hospitals over five years. The act also protected gains and losses to the OPPS for three years, restoring an estimated $1.4 billion to hospitals over five years. Rural hospitals were given a choice in the act of moving to the OPPS or staying under their current cost-based reimbursement structure, restoring an estimated $800 million to those hospitals over five years.

    Changes to the Health Care Financing Administration

    • The Health Care Financing Administration was directed in the act to pay rehabilitation services based on a per-case basis instead of a per-diem basis. The federal agency, which was renamed the Centers for Medicare & Medicaid Services in 2001, administers the Medicare program and works with state governments to administer Medicaid. That change, along with enhancement payments to hospitals that are exempt from the outpatient prospective payment system, restored an estimated $300 million to hospitals over five years.

    Changes to Teaching Hospitals and Home Health Care Providers

    • The act also gave teaching hospitals an increase in indirect medical education payments totaling 6.5 percent in 2000 and 6.25 percent in 2001, restoring an estimated $600 million to teaching hospitals over five years. Indirect medical education payments are given to hospitals with resident physicians involved in an approved graduate medical program. Home health care providers were also given a one-year delay in a scheduled 15 percent drop in home health payments, restoring an estimated $450 million to hospitals with home health care agencies over five years.

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