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Health Care Providers Scurry to Prepare for Medicare Budget Cuts to Come with Debt Deal

Social Security and Medicaid exempted from budget cuts - see video below

Aug. 2, 2011 - The Senate passed and President Obama quickly signed this afternoon the battered bill to raise the U.S. debt ceiling and begin efforts to reduce the deficit. At least one of the programs that primarily impacts senior citizens – Medicare – is certain to feel the budget axe in at least the second round of the $2 trillion in deficit reductions.

In remarks this afternoon the President said, “Yes, that means making some adjustments to protect health care programs like Medicare so they’re there for future generations.”

But, he added, we can’t “ask seniors to pay more for health care.”

He also said, “It also means reforming our tax code so that the wealthiest Americans and biggest corporations pay their fair share. And it means getting rid of taxpayer subsidies to oil and gas companies, and tax loopholes that help billionaires pay a lower tax rate than teachers and nurses."

Medicare is clearly in the sights of Republicans, who earlier this year passed a bill in the House to convert the current program into a private system paid for by vouchers.

The good news for seniors, however, is that Medicaid and Social Security are exempt from budget cuts, for now.

In the second round of budget cutting, the bill calls for a bipartisan committee from Congress to cut another $1.5 trillion and that is where most expect Republicans, especially the Tea Party group in the House, to swing the axe at Medicare. There is, however, a small bit of protection in the bill – it limits the Medicare cuts to no more than two percent of its budget.

Health On The Hill: Kaiser Health News' Mary Agnes Carey talks with Jackie Judd about the lack of Medicare and Medicaid cuts in the initial round of cuts tied to the debt ceiling increase, and about what sort of cuts the programs could be open to later in the year. Transcript below news story.

A media round-up by Kaiser Health News finds physicians, hospitals, nursing homes and home health care providers are all bracing for pain as the debt-ceiling agreement kicks in.

The Associated Press/Washington Post: Advocates For Seniors And Health Care Industry Fear Big Cuts Could Flow From Debt Deal

When it comes to Medicare and Medicaid, the debt deal raises more questions than it answers. The giant health care programs serving some 100 million elderly, low-income and disabled Americans were spared from the first round of cuts in the agreement between President Barack Obama and congressional leaders. But everything's on the chopping block for a powerful new congressional committee that will be created under the deal to scour the budget for savings (8/2).


Earlier Stories


Medicare, Medicaid Appear to Have Escaped Budget Cuts This Round: Health on the Hill

House Minority Leader Nancy Pelosi leads a rally and news conference to mark the 46th anniversary of the passage of Medicare in Washington Wednesday (Photo by Chip Somodevilla/Getty Images).KHN Senior Correspondent Mary Agnes Carey has been investigating to understand why

July 28, 2011

Public Wants Debt Ceiling Compromise, Expects a Deal Before Deadline: Pew Research

 GOP Widely Viewed as "More Extreme in Its Positions"

 ●  Earlier Pew Poll Finds Obama Draws More Confidence - July 26, 2011

'Gang Of Six' Plan Includes Deep Health Care Cuts; Making Social Security Solvent

Tom Coburn, R-Okla., rejoined the Gang of Six to give it new life.Seniors, advocates focus on health care cuts; Social Security actions draw little concern - plan summary below

Jul 21, 2011

Obama Backs 'Gang Of Six' Plan That Includes Medicare, Social Security Cuts

Senate leaders, others working on backup plan to allow Obama to raise the debt ceiling in exchange for a much smaller package of spending cuts - July 20, 2011

Senior Citizen Advocates Warn About Cuts to Entitlements in Last Minute Deal

National Association of Agencies on Aging take their message to Capitol Hill to stop cuts to Medicaid and Medicare

By Juan E. Gastelum

July 20, 2011

Read more on Politics for Senior Citizens


Politico: Medicare Providers Face Cuts

Physicians, home health practitioners and other providers could see an additional 2 percent pay cut on top of double-digit Medicare reductions already slated for 2012 under the debt ceiling deal reached by the White House and congressional leaders late Sunday. There's also more general concern about a new congressional panel to be created by the deal that would have broad authority to cut federal spending on Medicare, Medicaid and even some parts of President Barack Obama's health care law, according to health care lobbyists and budget officials (Dobias, 8/1).

The Wall Street Journal: Health Care Companies Are Infected By Severe Case Of Washington Jitters

A wide swath of nursing-home companies and other health-care providers are getting rattled by the political drama in Washington. On Monday, Medicare's plan to cut nearly $4 billion dollars in spending to nursing-home operators — an attempt to correct flaws in the agency's reimbursement rates — spooked a health care industry already on edge from the increased scrutiny of government spending.

The growing push to rein in health care costs, as indicated by the debt debate, weighed on the entire health care sector, especially those companies that would feel the bite of Medicare cutbacks most directly, such as hospitals. Affected groups warned of poorer medical care for the nation's seniors as a result of any cuts. But the biggest losers Monday were the operators of nursing homes (Korn and Kamp, 8/2).

MarketWatch: Medicare Cuts Hammer The Hospital Sector

The Centers for Medicare and Medicaid Services said Friday that it planned to reduce payments to skilled-nursing facilities by 11.1 percent for fiscal 2012, cutting $3.87 billion out of the spending plan. CMS said in a note Friday that the rates "correct for an unintended spike in payment levels and better align Medicare payments with costs."

The move took the market by surprise. "While the 11 percent reduction was an option as part of the initial proposal, we are still surprised CMS is implementing this magnitude of cut, and without a phase-in," Credit Suisse analyst Ralph Giacobbe said in a note to clients (Britt, 8/1).

Politico Pro: Deal 'Trigger' Could Endanger Part Of the ACA

Health reform advocates are worried that the debt deal struck by the White House and congressional leaders Sunday night opens up a path to weaken the Democrats' health law. The deal to raise the debt ceiling would task a 12-member bipartisan committee to come up with $1.5 trillion in deficit reduction and would require across-the-board cuts starting in 2013 if those efforts fail. Although Medicare providers could face as much as a 2 percent reduction in payments, Social Security and Medicaid are specifically exempted from the cuts (Millman, 8/1).

Bloomberg: WellPoint, HCA Drop On Concern Debt Agreement May Lead To Cuts In Medicare

WellPoint Inc., the largest insurer by enrollment, HCA Holdings Inc., the biggest hospital chain, and Kindred Healthcare Inc., the top nursing home operator, dropped in trading after President Barack Obama announced a debt-reduction deal that may lead to Medicare cuts. Under the plan, Medicare may face across-the-board reductions when a bipartisan congressional committee meets to trim $1.5 trillion from the deficit by Thanksgiving. If deadlocked, the committee must divide the cuts evenly among defense and domestic programs. The reduction in Medicare, the U.S. health plan for the elderly and disabled, would be aimed at provider payments, not benefits (Wechsler and Armstrong, 8/1).

Reuters: Skilled Nursing Stocks In Sick Bay On Big Medicare Cuts

Shares of skilled nursing facilities plunged on Monday, after the U.S. government announced final reimbursement rate cuts that confirmed the market's worst fears, with little reprieve in sight. On Friday, the Centers for Medicare & Medicaid Services (CMS) cut 2012 payments for skilled nursing facilities by 11.1 percent, or $3.87 billion. … The U.S. government has been under pressure to cut Medicare costs — expected to nearly double in 10 years to $1.02 trillion — as it grapples with mounting federal debt. Analysts expect the industry to lobby the Congress to mitigate the loss but expect little to come out of that (Jain, 8/1).

Modern Healthcare: Deficit-Cutting Proposal Spurs Concern

Hospital advocates are concerned that the deficit-reduction proposal contained within the $2.1 trillion debt-ceiling deal that Congress will vote on imminently will target such providers for a large amount of the required savings, but they stopped short of calling for its defeat. ...

The second stage of the debt deal, which directs a 12-member congressional committee to specify $1.5 trillion in cuts by Nov. 23, has caused the greatest provider concerns. Their worry stems from the plan for a "trigger" of $1.2 trillion in 10-year cuts if the committee and Congress fail to meet the initial $1.5 trillion savings goal. Those trigger cuts, according to the White House, would include up to a 2 percent cut in Medicare provider payments (Daly and Evans, 8/1).

NPR: Still To Come: The Fight Over Medicare Cuts And Tax Hikes

The rapidly rising cost of health care is expected to be a key driver of rising government spending over the next decade. (This isn't simply due to the aging of the population; health spending is growing much faster than the economy, even after adjusting for age.) CBO Medicare accounts for both the biggest share of federal health spending. It's also a very popular program, and one that's politically very difficult to cut (Goldstein, 8/1).

CQ HealthBeat: Debt Deal's Shield Against Medicare, Medicaid Cuts

The impact of the debt ceiling legislation on Medicare, Medicaid, and the health care overhaul law may not be as great as some analysts initially feared — but all three could still take significant hits in the coming years. Even House Democrats suspicious of the agreement expressed relief Monday that the White House negotiated provisions that would exempt Medicaid and limit Medicare cuts in the event a new trigger mechanism requires across-the-board spending cuts (Reichard, 8/1).

Transcript of Video (Video in story above)

KHN's Mary Agnes Carey talks with Jackie Judd about the lack of Medicare and Medicaid cuts in the initial round of cuts tied to the debt ceiling increase, and about what sort of cuts the programs could be open to later in the year.

Watch the video or listen to the audio.


JACKIE JUDD: Mary Agnes, Medicare is not touched in this first part of the deal, the $900 billion in savings, but there is a possibility under certain circumstances that Medicare could be affected later this year. What are those potential circumstances?

MARY AGNES CAREY: As part of the deal, there is a committee -- bipartisan, bicameral committee of lawmakers -- that is charged with reducing the deficit, coming up with cuts for another $1.5 trillion. Medicare could be on the table then. But there is a little bit of protection there, that Medicare would not be touched by more than 2 percent. Whether the committee’s recommendations were not accepted, if there had to be automatic cuts -- that’s another part of the deal. So Medicare is open, but it is protected to some extent.

JACKIE JUDD: And 2 percent of what?

MARY AGNES CAREY: It’s 2 percent of what the spending would be in that fiscal year. So, while no provider likes a cut at all, ever, if you look at some of the numbers in 2010, the federal government spent $520 billion on Medicare. That’s expected to grow to $970 billion by 2021. So you’re looking at a 2 percent cut in a particular fiscal year of spending.

JACKIE JUDD: And it’s a slowdown in the projected growth. It’s not as if the program won’t continue to grow.

MARY AGNES CAREY: No, it will continue to grow every year. But then again, if you allow a 2 percent cut [in growth], that would be a reduction. Providers will certainly complain about it. They’ll say it might impact beneficiaries’ access to care. Whether or not Congress is in the mood to hear these arguments, we’ll have to wait and see. But it definitely would be a reduction of the 2 percent.

JACKIE JUDD: And the provision is that it would impact the providers.

MARY AGNES CAREY: That’s the thought, exactly. But that’s where the providers will step up and say: Now wait a minute -- if you impact us it will impact the beneficiary.

JACKIE JUDD: Mary Agnes, as you know more than most, there is this annual ritual in Washington called the "doc fix."

MARY AGNES CAREY: That’s exactly right.

JACKIE JUDD: How does the "doc fix" get impacted if there is this 2 percent cut.

MARY AGNES CAREY: Well, let’s look and let’s say, for example, that the commission produces its particular cuts in Medicare or you have this automatic across-the-board cut to obtain those savings. That would be happening right near the end of the year. Congress, for example, has to have an up or down vote on these recommendations by December 23. The current physician payment fix for Medicare expires December 31. So you’re going to have lawmakers looking for money in Medicare in a variety of areas. They’ll have the pressure of either producing this report and having it passing, or if it’s not, the across-the-board cut. And no one wants to see a Medicare physician payment cut – they’re facing cuts of something like 29 percent if another "doc fix" isn’t passed. So you can imagine what December is going to be like on Capitol Hill.

JACKIE JUDD: But it’s possible in that scenario that the doctors would face a more than 2 percent reduction in reimbursement rates if the "doc fix" becomes too tangled up in the politics of everything else Congress has to do.

MARY AGNES CAREY: Right, they could certainly face a hit. If Congress can’t find money to offset it, then they will face a payment cut.

JACKIE JUDD: Let’s move onto Medicaid. The conventional wisdom in Washington is Medicare can’t be touched because it has such a powerful constituency behind it. Medicaid is more vulnerable because it does not have nearly as powerful a constituency -- and yet Medicaid is not part of either the first stage of the deal or the second. How did that happen?

MARY AGNES CAREY: I think it’s a variety of forces. Obviously, the governors were very upset about any more Medicaid cuts. They’d had additional money through the stimulus program that stopped on July 1. They were very concerned about that.

The economy has been really bad. You’ve had people grow on the Medicaid rolls, that’s been a pressure. The groups of people who represent the Medicaid folks were pushing Congress to not make cuts. But let’s not forget about the health care law. [States will] be adding 16 million people to the Medicaid program starting in 2014. It didn’t make a lot of good policy sense to cut that starting in 2013 – just a year before you have the Medicaid expansion of the health law.

JACKIE JUDD: And is it explicitly stated in the deal -- as we now know it to be -- that Medicaid is off limits?

MARY AGNES CAREY: Yes, absolutely.

JACKIE JUDD: Okay, very good. We will return to this undoubtedly. Thank you very much, Mary Agnes Carey of Kaiser Health News.



Some of this information is reprinted from with permission from the Henry J. Kaiser Family Foundation. You can view the entire Kaiser Daily Health Policy Report, search the archives and sign up for email delivery. © Henry J. Kaiser Family Foundation. All rights reserved.


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