Fear­ing Medi­care pay is in the cross hairs, providers gear up for a tough fight

Modern Healthcare - - Front Page -

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.

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