Without details, the healthcare industry continued to be at a heightened state of anxiety as the congressional deficit-reduction panel remained deadlocked heading toward its deadline this week.
Deadlock leaves industry anxious
Providers, physicians and payers were waiting to see what—if any—plan the Joint Select Committee on Deficit Reduction would develop before its Nov. 23 deadline to identify at least $1.2 trillion in cuts over 10 years. If the committee fails to identify these cuts, then the so-called “trigger,” or sequestration, will kick in, and Medicare providers will face a 2% reduction in payments starting in 2013.
Fitch Ratings issued a report attempting to project the fallout in the healthcare industry, estimating that a 2% Medicare cut would cause not-for-profit hospital operating margins to drop by roughly 29%, on average, with the caveat that the analysis doesn't reflect any cost-reduction measures hospitals might take in response.
“Given the current political discussion, Fitch believes that healthcare spending is a likely target under any deficit reduction initiative,” Fitch wrote in the report.
Meanwhile, Moody's Investors Service released an analysis predicting that any cuts the deficit-reduction supercommittee identifies would hit hospitals and drug companies the hardest.
Medicare cost-sharing for seniors, payments to healthcare providers, prescription drug costs and Medicaid spending are the four most likely “target” areas for the committee to cut government healthcare costs, according to the Moody's report, which used previous deficit-reduction proposals, such as the ones from President Barack Obama and the National Commission on Fiscal Responsibility and Reform as the basis for its findings.
Moody's noted that a shift in costs to seniors could spell good news for payers. “Seniors might find Medicare Advantage, the private health-insurance option offered by these companies, more affordable than traditional Medicare,” the Moody's report said. “This may not be obvious. All other things being equal, if government Medicare spending is reduced, Medicare Advantage reimbursement rates to insurers will also be reduced,” it continued. “However, we believe that insurers would be able to redesign their plans to make them more attractive to seniors than traditional Medicare, mainly by focusing on the cost-sharing aspects.”
And even if the deficit panel doesn't come up with a plan in time for the deadline, the quest for a package of cuts in lieu of the so-called trigger may not be over.
“Just because the supercommittee fails doesn't mean that other proposals can't come together to either chamber in the month that's remaining,” said Eric Zimmerman, an attorney with McDermott Will & Emery. “Sequestration may get triggered on Jan. 2, but Congress can come in any time before 2013 specifying how cuts can be made between now and then.”
As a final plea to supercommittee members, Sens. Bernie Sanders (I-Vt.), Barbara Mikulski and Ben Cardin (D-Md.) and Rep. Rosa DeLauro (D-Conn.) hosted a rowdy group of Medicare, Medicaid and Social Security beneficiaries on Capitol Hill late last week to emphasize how those cuts will play out for both patients and providers.
“One of the proposals we've heard in media reports involves cuts to graduate medical education—the very program in Medicare that allows physicians like me to work in hospitals like BMC and undergo on-the-job training we'll need to become the physician workforce of the future,” said Dr. Jessica Eng, a physician who specializes in geriatrics at Boston Medical Center. “With a shortage of primary-care doctors and an aging population, that's clearly the opposite of how we need to be investing in our healthcare system.”
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