Healthcare Business News

Late News: Budget warning

White House details impact of looming cuts

By Rich Daly
Posted: February 9, 2013 - 12:01 am ET

The Obama administration is warning that budget cuts scheduled for March 1 would hit especially hard in mental healthcare, medical research and the drug approval process.

On Friday, the administration released details of some of the nonmilitary cuts under the Budget Control Act of 2011, which required $1.2 trillion in across-the-board spending cuts from most federal programs over 10 years. The White House paper said the cuts would mean the loss of 12,000 research positions funded by grants from the National Institutes of Health and the end of treatment for 373,000 people with mental illness due to reductions in the Mental Health Block Grant.

The paper also warned that administrative cuts at the FDA's Center for Drug Evaluation and Research could result in “delays in new drug approvals.”

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The administration previously offered more detailed accounts of the so-called sequester's impacts on federal agencies but now says the effects could be worse. That is because the roughly 5% annual reduction in nondefense federal programs would need to occur with only seven months remaining in the fiscal year so they would deepen to an “effective” 9% cut in those programs' budgets.

The message followed a growing number of statements by Republican lawmakers that they expect the reductions won't be averted or delayed again, much to the alarm of Democrats.

The president has urged Republicans to accept a package of alternate cuts and taxes to allow for a short delay while a permanent replacement to sequester is developed. The sequester was previously scheduled to begin Jan. 2 but was delayed by an end-of-the-year deal.

Unmentioned in Friday's paper was the 2% cut to Medicare provider and insurer payments that also will occur under the sequester. That reduction would eliminate $100 billion in Medicare spending over 10 years, including $3 billion in the current fiscal year, according to updated estimates released this week by the Congressional Budget Office.

“Cuts to physician payments resulting from sequestration would further destabilize the Medicare program and compound the already dire situation for medical group practices caused by the sustainable growth rate formula,” Dr. Susan Turney, president and CEO of the MGMA-ACMPE, wrote in a Feb. 8 letter to congressional leaders.

Several provider advocates, however, said in recent interviews that they were resigned to the cuts taking effect because of the political stalemate and were developing strategies to reverse them later. “The probabilities are very high that the sequester will go into effect,” said Kenneth Raske, president of Greater New York Hospital Association.

Others have raised concerns that a package of replacement cuts, which the administration has avoided specifying, could be worse than the sequester. For instance, some proposals have surfaced to replace defense cuts with further reduced payments to providers, said Alan Rosenbloom, president of the Alliance for Quality Nursing Home Care. “Under the present political situation, there is still concern that they could replace a meat ax approach with something that is still a very blunt instrument,” he said.

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