Dec. 7, 2012 - The impending
"fiscal cliff" is a package of automatic spending cuts and tax hikes set
to kick in next month unless President Barack Obama and Capitol Hill
agree on a way to stop them. Below are answers to how this
could impact Medicare, Medicaid and TRICARE, the health program for the
military and veterans.
Negotiations to avert the cuts are
ongoing and both sides have exchanged offers. The president and
congressional Democrats have said they will reduce spending on
entitlements, including Medicare, if Republicans will agree to increase
tax rates on the highest earners. While Republicans have agreed to more
revenue, they oppose increasing tax rates, preferring to focus on
closing loopholes and eliminating some deductions.
Here are a few questions and
answers about what could happen in the weeks before the end-of-year
Q: If no deal is struck, how
would that affect Medicare patients as well as the hospitals and
physicians and other providers who care for them?
A: Under the series of automatic
spending cuts known as "sequestration," Medicare providers would be
subject to an across-the-board 2 percent payment cut, or $11 billion in
fiscal 2013. According to a September
from the Office of Management and Budget,
bear the largest share of the cuts, with payments reduced by
about $5.8 billion.
Seniors would see no changes in
Q: How does that 2 percent cut
in payments to physicians affect the 27 percent cut in Medicare payments
to doctors already scheduled to occur in January?
A: Physicians who accept Medicare
patients would face the 2 percent cut on top of an already scheduled 27
percent reduction in January unless Congress steps in to stop it.
was created in a 1997 deficit reduction law that called for setting
Medicare physician payment rates through a formula based on economic
growth. It’s known as the "sustainable growth rate" (SGR).
For the first few years, Medicare
expenditures did not exceed the target and doctors received modest pay
increases. But in 2002, doctors reacted with fury when they came in for
a 4.8 percent pay cut. Every year since, Congress has staved off the
scheduled cuts. But each deferral just increased the size – and price
tag – of the fix needed the next time.
A deal on the SGR could be part of
a "grand bargain," if congressional fiscal cliff negotiators decide to
include it. To that point, Obama’s offer to Republicans included $25
billion to stop the scheduled cut. Congress could also pass separate
legislation to stop the cuts. Some doctors say that if Medicare
reimbursements are further reduced they may stop accepting Medicare
Q: If negotiators do reach a
deal, what could that mean for Medicare?
A: It depends on
how large a role
Medicare plays in a broader deal. Some of the proposals
include raising Medicare's eligibility age to 67, asking wealthier
Medicare beneficiaries to pay more for their coverage and paying
Medicare providers less. All are complicated and many Democrats have
said that they do not want to make changes that harm beneficiaries or
shift costs from the government onto seniors. Republicans are insisting
that entitlement savings play a large role in any deficit reduction
Q: How is Medicaid affected,
A: Medicaid does not face any
automatic cuts starting Jan. 1. The Supreme Court's ruling made the
health law’s Medicaid expansion optional for states, so there’s concern
that any reductions in federal Medicaid spending might make governors
even more reluctant to expand the federal-state program.
Many Republicans, including GOP
presidential nominee Mitt Romney and his running mate, Rep. Paul Ryan,
Medicaid into a block grant, where states are given a set
amount of money and more freedom to decide who is covered and what
benefits they would receive. But the block grant concept is a
non-starter with Obama and Democrats.
Q: If no deal is reached by Jan.
1, what happens to federal funding for medical research?
A: The National Institutes of
Health would see a $2.5 billion reduction in 2013, which means that the
agency would "have to halt or curtail scientific research," according to
the OMB analysis. Other agencies would see cuts, too. For example, the
Centers for Disease Control and Prevention would face cuts of $490
million, and the Food and Drug administration would see reductions of
about $318 million.
Q: If no deal is reached, what
happens to health care for members of the military and veterans?
A: The TRICARE program for active
members of the military system would also face an across-the-board 2
percent cut. The Veterans Affairs health system, however, is exempt from
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