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.
—Joseph Antos, PhD, health policy expert, American Enterprise Institute, Washington, D.C.
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.
Separately, the Medicare Payment Advisory Commission (MedPAC) released a proposal that would save $233 billion over 10 years—designed in large part to offset the costs necessary for a permanent SGR fix. Among its suggestions, the MedPAC proposal would freeze reimbursements for primary-care providers (PCPs) and trim payments to specialists by 5.9% per year for three years. Despite agreement by virtually everyone that the SGR has to go, groups like the Alliance of Specialty Medicine and American College of Surgeons have expressed concerns with MedPAC’s suggested offsets.
Dr. Antos says MedPAC has adopted the view that preventing the 29.4% cut in Medicare reimbursements will require spreading the pain more generally throughout the health sector. “That makes sense until you realize that politically, when you do that, you just generate lots of resistance from lots of organizations,” he says. So what about the SGR? Dr. Antos sees a permanent fix this year as “extremely unlikely,” especially given the general pessimism over the super-committee’s ability to agree on $1.2 trillion in cuts. Instead, he predicts a two-year fix that would require tens of billions in offsets but delay (yet again) more difficult political choices until after the 2012 elections. “They definitely do not want to be arguing about this next fall,” he says.