No surprise—we are talking about Washington here—the supercommittee proved to be not so super. Its collapse created a “fiscal cliff” last December of expiring tax breaks and massive budget cuts. Again, a short-term compromise was reached that extended some tax cuts and temporarily postponed the sequestration cuts.
That reprieve expired March 1 for discretionary spending and April 1 for Medicare. This week's CR to keep the government running would extend those cuts.
It's no secret that Medicare is one of the major drivers of the nation's long-term budget deficit, and taking steps to rein in unnecessary and wasteful spending by the program is high on everyone's agenda—including providers. That's why they agreed to $155 billion in Medicare cuts in 2010 as their contribution to passage of the Patient Protection and Affordable Care Act.
It wasn't pure altruism on their part. The reform law recycled that money into subsidies for the uninsured, most of which will wind up being spent on hospital and physician care (with 15% to 20% usually taken for insurance industry overhead). From the vantage point of providers, hospitals in particular, the compromise made sense because compensated care beats uncompensated care every time.
But Congress wasn't done whacking away at provider payments. There were temporary fixes needed for physician salaries, so Medicare and Medicaid became a logical place to look for budget offsets. Special payments for uncollectible debts were lowered. Payments to hospitals that serve a disproportionate share of the poor were cut.
In addition, the CMS continued to look for ways to whittle down what officials considered wasteful spending in the system. Rules updating the fee schedules for various diagnosis-related groups will cut those payments by more than $35 billion over 10 years. The agency adopted a three-day window for including ancillary services related to the DRG bundles, which eliminated another $4.2 billion in payments to hospitals.
While providers grumbled, they ultimately accepted those cuts, which the CMS claimed were data-driven. They vowed to “manage to Medicare”—that is, learn how to deliver the services at the price that the CMS paid.