AHA Urges Congress to Provide Relief from Forthcoming Medicare Sequester Cuts

The Honorable Charles E. Schumer                                               The Honorable Nancy Pelosi
Majority Leader                                                                               Speaker
U.S. Senate                                                                                     U.S. House of Representatives
Washington, DC 20510                                                                   Washington, DC 20515

The Honorable Mitch McConnell                                                    The Honorable Kevin McCarthy
Republican Leader                                                                          Republican Leader
U.S. Senate                                                                                     U.S. House of Representatives
Washington, DC 20510                                                                   Washington, DC 20515

Dear Leader Schumer, Speaker Pelosi, Leader McConnell and Leader McCarthy:

On behalf of our nearly 5,000 member hospitals, health systems and other health care
organizations, our clinician partners – including more than 270,000 affiliated physicians,
2 million nurses and other caregivers – and the 43,000 health care leaders who belong to our
professional membership groups, the American Hospital Association (AHA) urges Congress to
include in end of the year legislation provisions to extend the moratorium on Medicare
sequester cuts and to prevent the Statutory Pay-As-You-Go Act of 2010 (Statutory PAYGO)
sequester from taking effect at the end of this session of Congress. This legislation is
necessary so that hospitals and health systems can continue to care for patients, families and
communities.

The COVID-19 pandemic has resulted in historic challenges for hospitals and health systems
and the communities they serve, placing unprecedented stress on the entire health care
system and its financing. Data from Johns Hopkins University (through Oct. 4) show that there
have been nearly 44 million confirmed COVID-19 cases and over 700,000 reported deaths
from COVID-19 in the United States. In addition, according to data from the Centers for
Disease Control and Prevention, there have been over 3 million hospitalizations since August
2020, with the 7-day average of new hospital admissions of patients with COVID-19 increasing
approximately 280%, from about 1,900 the week ending July 1, 2021, to over 7,200 the week
ending Oct. 2, 2021. Hospitals have never experienced such a widespread, national health
crisis. The number of cases and hospitalization rates have directly affected the U.S. health
care system and its ability to continue to provide access to care.

The Budget Control Act of 2011 requires, among other things, mandatory across-the-board
reductions in certain types of federal spending, also known as sequestration. Medicare claims
incur a 2% reduction. The Coronavirus Aid, Relief, and Economic Security Act (CARES) Act,
signed into law in March 2020, included critical relief from sequestration as it applies to
Medicare payments from May 1, 2020, through Dec. 31, 2020. In light of the global pandemic
and its impact on health care and providers, the moratorium has been extended and is now
scheduled to expire Dec. 31, 2021. Failure to further extend the sequester moratorium would
result in $4.7 billion in cuts to hospitals and health systems in fee-for-service Medicare in
calendar year 2022 (see attached table with state-by-state data).

In addition, the Statutory PAYGO requires that mandatory spending and revenue legislation
not increase the federal budget deficit over a 5- or 10-year period. Should such legislation be
enacted without offsets, the Office of Management and Budget is required to implement
across-the-board reductions in certain types of mandatory federal spending, including
Medicare. Failure to waive Statutory PAYGO would result in an additional $9.4 billion in cuts to
hospital providers in fee-for-service Medicare in calendar year 2022 (see attached table with
state-by-state data).

The Congressional Budget Office has estimated that a Statutory PAYGO sequester in fiscal
year 2022 resulting from passage of the American Rescue Plan Act of 2021 would cause a 4%
reduction in Medicare spending – or cuts of approximately $36 billion. Medicare fee-forservice
payments to hospitals tend to total about one-quarter of total Medicare spending.

Although Congress has passed legislation that has increased the deficit several times since
enactment of the Statutory PAYGO law, a PAYGO sequester has never been triggered. In fact,
Congress always has acted to waive the reductions, or “wipe the PAYGO scorecard clean,”
prohibiting the enacted deficit effects of legislation from causing a PAYGO sequester of
Medicare or other federal spending programs. We urge Congress to again prevent these cuts.

The pandemic has put severe financial pressure on hospitals, including, but not limited to:
higher expenses for labor, drugs and supplies; the astronomical costs of preparing for a surge
of COVID-19 patients; months of essential hospital revenue being erased due to the
combination of a forced shutdown and slowdown of regular operations for non-emergent care;
and the high cost of treating COVID-19 cases, which tend to be incredibly resource intensive.

In a report released by the AHA in September 2021, Kaufman Hall projected that hospitals
nationwide will lose an estimated $54 billion in net income over the course of the year, even
after taking into account CARES Act funding from last year. However, the uncertain trajectory
of the delta and mu variants in the U.S. this fall could result in even greater financial
uncertainty for the hospital field. Now is not the time for reductions in Medicare payments to
providers.

Congress to date has provided much-needed assistance to health care providers in the form of
Medicare sequester relief. In addition, Congress has always acted to waive the Statutory
PAYGO law on a bipartisan basis. Congress should extend the moratorium on the Medicare
sequester and prevent a Statutory PAYGO sequester to ensure that no reductions in Medicare
payments to providers occur early next year.

Thank you for your consideration.

Sincerely,

/s/

Stacey Hughes
Executive Vice President

Attachment