“Fis­cal cliff” cuts are only the be­gin­ning for providers

With one round of cuts over, providers still have more to worry about

Modern Healthcare - - NEWS - Jes­sica Zig­mond

Health­care providers may think they got a bad deal in fed­eral leg­is­la­tion to avert the “fis­cal cliff,” but they should be much more con­cerned about the po­ten­tial for larger re­im­burse­ment cuts in the next round of deficit-re­duc­tion ne­go­ti­a­tions.

On New Year’s Day, Congress passed the Amer­i­can Tax­payer Re­lief Act of 2012, a tax package that also post­pones for two months the au­to­matic fed­eral spend­ing cuts known as the se­quester.

Vice Pres­i­dent Joe Bi­den and Se­nate Mi­nor­ity Leader Mitch McCon­nell (R-Ky.) devel­oped the deal in the fi­nal hours of 2012.

Law­mak­ers fol­lowed a now-fa­mil­iar pat­tern of us­ing a broader bill as the ve­hi­cle to tem­po­rar­ily fix Medi­care’s sus­tain­able growth-rate for­mula to pay physi­cians. The new law—which Pres­i­dent Barack Obama signed the next day—staved off a 26.5% pay­ment cut to doc­tors on Jan. 1 and ex­tended pay­ment rates through Dec. 31, 2013.

But in giv­ing doc­tors a re­prieve, Congress will again cut from other Medi­care providers to cover the cost of paying for the SGR fix and to ex­tend cer­tain Medi­care pro­grams set

to ex­pire (See chart).

And even though the fis­cal cliff drama has ended, health­care providers con­tinue to face two sig­nif­i­cant hur­dles: a per­ma­nent so­lu­tion to the SGR that will cost nearly $300 bil­lion to fix and an even­tual agree­ment on deficit re­duc­tion that is sure to in­clude en­ti­tle­ment re­form and more cuts to providers. Congress is now poised for an­other fis­cal show­down that en­com­passes ad­dress­ing the se­quester it just de­layed, rais­ing the fed­eral debt ceil­ing around March and fund­ing the government for the re­main­der of 2013 af­ter a cur­rent fund­ing res­o­lu­tion ex­pires March 27.

The White House noted in a sum­mary that the “pres­i­dent stood firm” against GOP pro­pos­als to pay for the SGR patch with cuts to the Pa­tient Pro­tec­tion and Af­ford­able Care Act or ben­e­fi­cia­ries. But the Obama ad­min­is­tra­tion’s health­care over­haul was not spared en­tirely.

For in­stance, the package re­scinds all un­ob­li­gated funds to the law’s Con­sumer Op­er­ated and Ori­ented Plan Pro­gram, which is es­ti­mated to gen­er­ate about $2.3 bil­lion in sav­ings. It also re­pealed the Com­mu­nity Liv­ing As­sis­tance Ser­vices and Sup­ports Act, which has no bud­get score tied to it, but en­sures that the long- term- care in­surance pro­gram won’t resur­face. In­stead, the law calls for a new com­mis­sion to de­velop a plan that im­ple­ments and funds a sys­tem of long-term care ser­vices.

Hos­pi­tals were hit hard­est in the fis­cal deal, cov­er­ing much of the tab through a doc­u­men­ta­tion and cod­ing ad­just­ment that will phase in re­coup­ment of past over­pay­ments to hos­pi­tals that were made be­cause of the tran­si­tion from DRGs to Medi­care­sever­ity DRGs. That mea­sure is ex­pected to save about $10.5 bil­lion. An­other pro­vi­sion calls for re-bas­ing dis­pro­por­tion­ate-share hospi­tal al­lot­ments to keep the level of changes es­tab­lished in the Af­ford­able Care Act, which is sup­posed to yield sav­ings of about $4.2 bil­lion.

“We think it’s to­tally ir­re­spon­si­ble and to­tally un­fair to ar­bi­trar­ily cut from other providers to pay for the prob­lem Congress cre­ated,” said Richard Pollack, ex­ec­u­tive vice pres­i­dent for ad­vo­cacy and pub­lic pol­icy at the Amer­i­can Hospi­tal As­so­ci­a­tion. “And it’s got to stop,” he said, not­ing that about $14 bil­lion of the nearly $30 bil­lion in cuts are to hospi­tal pay­ments.

But Julius Hob­son, a former lob­by­ist for the Amer­i­can Med­i­cal As­so­ci­a­tion who now serves as a se­nior pol­icy ad­viser at Polsinelli Shughart, said the deal’s health­care cuts were “low-hang­ing fruit,” which con­se­quently pose more se­ri­ous threats in the coming weeks and months.

“The prob­lem I see in those off­sets is con­nected to the long-term prob­lem: If we don’t get a per­ma­nent fix in the grand deal, or if there will be many grand deals and you don’t do a doc fix, where do you get the off­sets for an­other patch?” Hob­son said.

Congress needed to find only about $25 bil­lion to tem­po­rar­ily fix the SGR, so they didn’t have “to go big” this time around, said Eric Zim­mer­man, a part­ner with McDermott Will & Emery in Washington. Hos­pi­tals, he said, were spared cuts to bad debt, grad­u­ate med­i­cal ed­u­ca­tion, and eval­u­a­tion and man­age­ment ser­vices. They might not be so lucky in the next goaround.

“For the pres­i­dent to get more room on the debt limit, chances are Repub­li­cans are go­ing to want to see com­men­su­rate spend- ing re­duc­tions, and that is go­ing to re­quire sub­stan­tial changes to Medi­care and Med­i­caid—and Congress will have to look for big dol­lars on those pro­grams.”

A broader de­bate over en­ti­tle­ment re­form would pro­vide a fo­rum to ad­dress a full re­peal of the SGR. Repub­li­can physi­cian-law­mak­ers are hope­ful that sub­stan­tive dis­cus­sions on this is­sue will hap­pen in 2013. Rep. Charles Bous­tany (R-La.), who told Mod­ern Health­care he voted against the fis­cal cliff bill be­cause of tax is­sues, said the House Ways and Means Health Sub­com­mit­tee is mak­ing progress on draft leg­is­la­tion to ad­dress the SGR. “We’re go­ing to push very hard to get a bill,” he said, although he did not sug­gest how to pay for it. “Pay-fors are all up for dis­cus­sion,” he added.

Rep. Michael Burgess (R-Texas) said he voted against the bill be­cause post­pon­ing the se­quester broke a prom­ise law­mak­ers made to the Amer­i­can peo­ple when Congress cre­ated the mech­a­nism, which was in­cluded in the 2011 Bud­get Con­trol Act to com­pel law­mak­ers to re­duce spend­ing.

Burgess, a physi­cian, also said he thinks there will be se­ri­ous talks about re­peal­ing the SGR this year. He doesn’t want the so­lu­tion to force physi­cians into par­tic­u­lar de­liv­ery models.

“There has to be a way to al­low all of the dif­fer­ent prac­tice pa­ram­e­ters to al­low them to con­tinue and flour­ish, in my opin­ion, in what­ever is the fol­low-on from the SGR,” Burgess said. “That is to say, it wouldn’t be right to make ev­ery­one prac­tice in an ACO be­cause there are some places in the coun­try where an ACO wouldn’t work.”

Sen. John Bar­rasso (R-Wyo.), left, talks to a col­league af­ter the fis­cal cliff vote. Bar­rasso, a physi­cian, voted yes on the bill.

Sources: Con­gres­sional Bud­get Of­fice, Mod­ern Health­care re­port­ing

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