Con­gres­sional in­ac­tion sets up au­to­matic cuts

Modern Healthcare - - SPECIAL REPORT -

Although the on­go­ing im­ple­men­ta­tion of and chal­lenges to the 2010 health­care over­haul law dom­i­nate the 2011 fed­eral health pol­icy dis­cus­sion, a num­ber of deficit-re­duc­tion ac­tivi- ties also af­fect health­care. Strug­gles by Washington’s elected lead­ers to ad­dress the fed­eral govern­ment’s bur­geon­ing debt—driven in large part by health cov­er­age pro­grams—ul­ti­mately fail to reach bi­par­ti­san con­sen­sus. In­stead, a de­fault round of $123 bil­lion in au­to­matic Medi­care cuts will oc­cur over the com­ing decade. Other changes likely to have

Other high­lights:

long-term im­pacts on fed­eral health pol­icy in­clude the fail­ure to find a per­ma­nent fix to the Medi­care pay­ment for­mula and the White House drop­ping Dr. Don­ald Berwick as its CMS ad­min­is­tra­tor nom­i­nee in the face of GOP op­po­si­tion and in­stead of­fer­ing his lower pro­file deputy, Mar­i­lyn Taven­ner.

In mid- April, Pres­i­dent Barack Obama of­fers a deficitre­duc­tion “frame­work” that in­cluded a $480 bil­lion drop in pro­jected health­care spend­ing as part of an ef­fort to achieve $4 tril­lion in deficit re­duc­tions over the next 12 years. Its con­tro­ver­sial pro­vi­sions in­clude the cre­ation of first-time Medi­care spend­ing caps and ex­panded cost-cut­ting pow­ers for the con­tro­ver­sial Independent Pay­ment Ad­vi­sory Board.

Later in April, the House passes a bud­get au­thored by Rep. Paul Ryan (R-wis.) that calls for re­duc­ing 10-year fed­eral deficits by $4.4 tril­lion, in part, through con­vert­ing fu­ture Medi­care ben­e­fi­cia­ries to a premium sup­port model.

Through­out the sum­mer, con­gres­sional and ad­min­is­tra­tion of­fi­cials ne­go­ti­ate boost­ing the $14.3 tril­lion fed­eral debt limit, as Repub­li­cans de­mand aus­ter­ity mea­sures to re­duce the govern­ment’s his­toric debt level and Democrats in­sist on in­creas­ing the debt level to avoid in­vestor fall­out. A bi­par­ti­san deficit-re­duc­tion group led by Vice Pres­i­dent Joe Bi­den meets through­out the sum­mer and tac­itly agrees on hundreds of bil­lions of dol­lars in long-term health­care spend­ing cuts, but the two par­ties dif­fer on the de­tails of those cuts.

In Au­gust, Obama signs the debt-ceil­ing in­crease bill into law, boost­ing the $14.3 tril­lion debt ceil­ing in ex­change for a com­bi­na­tion of about $2.5 tril­lion in spend­ing cuts over the com­ing decade. The law cre­ates a 12mem­ber con­gres­sional com­mit­tee, equally di­vided be­tween the two par­ties, to iden­tify ways to cut at least $1.2 tril­lion in fed­eral spend­ing. Au­to­matic cuts are to take place— mainly in de­fense and Medi­care—if no agree­ment is reached.

In Septem­ber, Obama pro­poses a pack­age that would re­duce fu­ture bud­get deficits by about $3 tril­lion over 10 years, in­clud­ing $320 bil­lion from fed­eral health­care pro­grams.

In Novem­ber, the su­per­com­mit­tee fails to reach a deal and au­to­matic cuts—known as se­ques­tra­tion—are set to be­gin in 2013. The Con­gres­sional Bud­get Of­fice es­ti­mates that Medi­care will cut up to 2% of providers’ an­nual pay­ments un­der se­ques­tra­tion, to­tal­ing ap­prox­i­mately $123 bil­lion from 2013 to 2021. Mem­bers of Congress in­tro­duce bills to pre­vent such au­to­matic cuts from af­fect­ing var­i­ous aspects of fed­eral spend­ing, in­clud­ing provider pay­ments un­der Medi­care.

At the end of 2011, the CMS is sched­uled to cut Medi­care physi­cian pay­ments by 27.4% un­der a con­gres­sional pay­ment for­mula. Physi­cians and hos­pi­tals warn about the dire im­pact of such cuts, as well as the neg­a­tive ef­fect of the peren­nial threat of such cuts on physi­cians who treat a large num­ber of Medi­care pa­tients.

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