THIS MIGHT HURT A BIT
Fearing Medicare pay is in the cross hairs, providers gear up for a tough fight
The newly enacted debt-ceiling deal may have saved the nation from a financial crisis, but it also managed to paint a target on the backs of healthcare providers. And the potential size and scope of the cuts they could face has providers scrambling for a response.
The deal followed a months-long partisan fight over extending the federal government’s borrowing authority beyond the $14.3 trillion limit it was set to reach Aug. 3. President Barack Obama signed a compromise into law last week that would provide $2.1 trillion in additional borrowing authority.
Critically, the deal includes two rounds of deficit cuts: more than $900 billion alreadyidentified cuts in discretionary spending over the next 10 years; and at least $1.5 trillion in cuts or tax increases from a bipartisan congressional panel. If the 12-member panel does not produce a package with majority support that is then approved by Congress, then automatic cuts saving $1.2 trillion over 10 years would occur, beginning in 2013 (See timeline, p. 7).
The second phase of the deficit-reduction deal—focused around the deficit committee— is much more likely to have major financial ramifications for healthcare providers, advocates said. One reason is the fiscal reality that payments to providers through federal healthcare programs are among the largest dollar items in the federal budget. Also, providers are a politically less potent force than Medicare beneficiaries, for example, which has allowed repeated efforts to cut or limit increases in their pay.
“Provider payment cuts are pretty easy to do, relatively speaking,” Michael Regier, senior vice president of legal and corporate affairs and general counsel for the provider alliance VHA, said in an interview.
Other provider advocates noted that numerous previous attempts to cut federal costs also have targeted providers, including the sustainable growth-rate formula for physicians and the coming Independent Payment Advisory Board that can target all providers.
Once the 12 members of the Joint Select Committee on Deficit Reduction are seated by mid-August, they will have about three months to develop at least $1.5 trillion in 10-year deficit reduction that a majority supports. The committee is free to target all aspects of Medicare and Medicaid for savings, and the programs’ relatively large size—they comprise one quarter of all federal spending—will make them tempting targets, according to budget experts.
For example, the Congressional Budget Office estimated that Medicare, which covers 47 million people, will spend $519 billion this year and grow to $929 billion in 2020.
“(S)ince you can’t close the deficit with just spending cuts, we’ll need a balanced approach where everything is on the table,” Obama said Aug. 2. “Yes, that means making some adjustments to protect healthcare programs like Medicare so they’re there for future generations.”
Another reason the special panel likely will look to those programs for savings is that several similar deficit-reduction groups also have concluded that the programs cannot only afford cuts but need them in order to remain financially viable over the long term.
The Social Security and Medicare boards of trustees predicted in May that Medicare’s hospital trust fund will be exhausted by 2024. Moreover, Medicare reimbursements for
“Neither side got everything it wanted,” Senate Majority Leader Harry Reid said last week after the debt-ceiling vote.