Healthcare Business News

Likely healthcare deficit targets come into view

By Jessica Zigmond
Posted: December 4, 2012 - 4:00 pm ET

As federal lawmakers remain stuck in negotiations to avert the fiscal cliff, healthcare experts say they're hearing the Medicaid provider tax, evaluation and management services and graduate medical education are payment areas lawmakers could cut to achieve entitlement-program savings as part of a deficit-reduction deal.

White House Communications Director Dan Pfeiffer said in a statement that a letter from House Republicans on Monday—intended as a counteroffer to an administration proposal last week—“includes nothing new and provides no details on which deductions they would eliminate, which loopholes they will close or which Medicare savings they would achieve.”

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Thin on details, the letter from the House leadership did highlight a recommendation to the Joint Select Committee on Deficit Reduction in November 2011 from Erskine Bowles, the former co-chairman of President Barack Obama's fiscal commission, in which Bowles called for a balanced package between spending cuts and some $800 in new revenue. At that time, Bowles also said he was open to the possibility of raising Medicare's eligibility age, which he noted could achieve about $100 billion in savings over 10 years (PDF).

But House Republicans did not formally endorse any specific proposal from Bowles, nor did they map out any specific amounts in healthcare program cuts. Eric Zimmerman, a partner with the law firm McDermott, Will and Emery, said he expects the president and congressional leaders to reach a grand bargain, but they won't be able to avert the fiscal cliff by Jan. 1.

“Congress and the president are going to agree to some amount of Medicare and Medicaid savings that is going to be very large,” Zimmerman said. “It's going to be much larger than what you would see in sequestration—somewhere in the range of $500 and $600 billion over 10 years, not evenly split between the two,” he said, estimating that providers might see about $400 billion in cuts come from Medicare and about $175 billion from Medicaid.

Zimmerman cited evaluation and management services, graduate medical education and bad debt as places Congress might look to cut. Meanwhile, Beth Feldpush, vice president for advocacy and policy at the National Association of Public Hospitals and Health Systems said her organization is worried that the Medicaid provider tax will play into deficit-reduction discussions, especially as the president's fiscal commission suggested eliminating the tax altogether.

“The original Simpson-Bowles proposal is still a blueprint for these deficit-reduction proposals,” Feldpush said, adding that a likely scenario would be to lower the provider tax rate to 5.5% from its current level of 6%. Providers pay the tax to their respective states to help fund Medicaid. And if there's an appetite to lower the rate to 5.5%, Feldpush said, that presents a “slippery slope” to lower the rate even more.

Separately Tuesday, NAPH launched a series of brief videos and a website of research and position papers in a new campaign to educate lawmakers about Medicaid's effects on both patients and the economy.

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