Politics of Medicare Cuts

It reads like a brainteaser from hell: Twelve members of Congress must identify at least $1.2 trillion to cut from the federal budget over the next 10 years. Social Security cuts are a virtual nonstarter with Democrats. Tax hikes on the wealthy are anathema to Republicans. Significant Medicare cuts will invoke the wrath of seniors. The Joint Select Committee on Deficit Reduction, evenly split between both political parties, must somehow reach a majority agreement on what to trim by the Nov. 23 deadline. Then the full Congress must approve the committee’s recommendations by Dec. 23.

Here’s another caveat: In a Sept. 20 letter, SHM and 117 other medical groups urged the deficit reduction “super-committee” to “include a full repeal of the fatally flawed Medicare sustainable growth rate (SGR) formula in its final legislation.” Unless Congress repeals or delays the widely despised SGR mechanism, Medicare reimbursement rates for doctors will be cut by a catastrophic 29.4% in January. A full repeal, however, could cost $300 billion or more over 10 years, according to estimates by the nonpartisan Congressional Budget Office (CBO). If the super-committee takes up the SGR challenge, it will need to find at least $1.5 trillion worth of mutually agreeable cuts.

In a final twist, President Obama has threatened to veto any deficit reduction plan that slashes Medicare benefits and fails to raise taxes on the wealthy. The punchline is that unless the divided super-committee, a polarized Congress, and the president can all agree, $1.2 trillion in domestic and military spending cuts will automatically kick in, giving both political parties a lump of coal just in time for Christmas.

If any solution is possible, it might have to rely on some old numbers regarding potential cuts to Medicare and other federal programs. “There’s no time to develop new policy,” says Joseph Antos, PhD, a health policy expert at the American Enterprise Institute, a conservative think tank. “The old ideas that have been kicking around for years are scorable [by the CBO], and because they’ve been around for so long, it’s easier to write the legislative language.”

Here’s a look at perennial Medicare proposals and the chances of their inclusion in serious deficit-reduction negotiations.

It’s easier to go after a supplier of products—and drugs are the biggest one—than it is to go after doctors or hospitals. And it’s hardest to go after beneficiaries.

—Joseph Antos, PhD, health policy expert, American Enterprise Institute, Washington, D.C.

Reduced Payments

Obama’s proposal to the super-committee includes $248 billion in Medicare cuts and savings. Of most direct relevance to hospitalists, about $57 billion comes from reduced payments to providers over 10 years. The proposal would reduce Indirect Medical Education add-on payments to teaching hospitals by 10%, end an add-on payment for hospitals and physicians in low-population states, and reduce payments to post-acute-care facilities.

Leave a Reply

Your email address will not be published. Required fields are marked *