Debt Ceiling Spending Cuts Agreement Leaves Medicare Payments at Risk

Yesterday, President Obama and congressional leaders reached an agreement to increase the nation’s borrowing authority and reduce the federal deficit. The House and Senate are expected to begin voting on the plan as soon as this evening.

The agreement contains both good news and bad news regarding Medicare payments to hospitals.

Initial proposals would have cut as much as $300 billion in Medicare and Medicaid, including drastic reductions to graduate medical education and the federal match for Medicaid, and elimination or phase out of the use of Medicaid provider taxes. Hospital leaders in California and around the country let their representatives know that additional cuts to these important programs were unacceptable. Led by the American Hospital Association, the Coalition to Protect America’s Health Care waged an aggressive advertising campaign for the last several weeks, giving voice to concerns regarding cuts to hospitals.

The final agreement has two parts. First, the debt ceiling will be raised and $917 billion in deficit-reduction efforts will be implemented over 10 years. The Medicare and Medicaid programs would not be impacted by those efforts.

Unfortunately, Medicare provider payments remain vulnerable in the second part of the agreement, which calls for a 12-member bipartisan congressional committee to find an additional $1.2 trillion in deficit reductions before November 23, 2011. There is no constraint on the committee’s purview — it can recommend cuts to any federal program, including Medicare, Medicaid and Social Security, and it can recommend revenue increases. The committee’s recommendations would be presented to the House and Senate under expedited rules for a simple up or down vote by the House and Senate before December 23, 2011.

If Congress fails to either act on the committee’s recommendations or send a constitutional amendment to balance the federal budget to the states for ratification before the end of the year, automatic across-the-board spending cuts totaling $1.2 trillion would go into effect. The cuts would apply to both mandatory and discretionary spending programs beginning in 2013. Medicaid would be exempt from these cuts; however, Medicare provider payments would face a cut of no more than 2 percent over nine years (2013-2020). This could be as much as $390 million for California hospitals in 2013 alone.

How those cuts would be distributed throughout the provider community is unclear.

CHA will continue to work with the California congressional delegation to educate members about the impact Medicare and Medicaid provider cuts would have on hospitals and the patients they serve.