Healthcare Business News

Lag in sequester's Medicare cuts offers hope to providers

By Rich Daly
Posted: February 26, 2013 - 6:00 pm ET

Will a one-month delay in the Medicare component of a looming package of debt-related cuts give hospitals time to avoid the budget ax? Some healthcare provider advocates say it might.

The key to breaking an ideological faceoff between the Obama administration and congressional Republicans and finding an alternative to $1.2 trillion in 10-year cuts scheduled to begin Friday is the force of public opinion, said public policy experts. Despite a steady drumbeat of dire warnings from impacted industries and liberal advocacy groups about negative consequences, the looming cuts known as the sequester have generated little interest from the general public. But that could change when the cuts begin and people see concrete impacts in their lives.

By a quirk of the sequester's rules, the 2% cut to Medicare providers and insurers will not begin until April 1. That lag from the bulk of the sequester's cuts could give Medicare providers time to benefit from a surge in public outrage as the early cuts go into effect driving a quick sequester-ending deal, according to some provider advocates.

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“People are going to wait to see what actually happens when the sequester actually begins, with some of the ramifications the White House has outlined, to see what actually happens with public opinion,” said Chip Kahn, president and CEO of the Federation of American Hospitals. “Clearly, we're not there yet—it hasn't started.”

The possibility that implementation of the sequester could prove the sequester's undoing did not keep providers and their advocates from trying to get Congress to avert it even in the final days before it was to go into effect.

Andrew Carter, president and CEO of the Hospital and Healthsystem Association of Pennsylvania, led a 20-member group of hospital executives from his state to Capitol Hill on Tuesday, and the sequester was their primary focus.

“This a bigger deal than most casual observers would appreciate,” Carter said about the fiscal impacts of both the sequester's Medicare cuts plus its reductions in research funding and federal graduate medical education support.

Although provider advocates hold out little hope that political leaders will find a way to avoid the sequester before it begins, they are keeping a close eye on its alternatives under consideration. The only formal proposal to replace the sequester, sponsored by Senate Majority Leader Harry Reid (D-Nev.), drew support from the American Hospital Association because it would replace the sequester with a series of tax increases and non-healthcare cuts. But hospitals are warily watching an informal Republican proposal to give the Obama administration flexibility to achieve overall savings required by the sequester. Such a measure aims to avoid deep cuts to critical services but applying that flexibility to the Medicare cuts could subject providers to cuts greater than 2% of their Medicare payments, warned Richard Pollack, executive vice president of the American Hospital Association.

“We wouldn't want to open up any further vulnerabilities there,” he said.

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