Health Stakeholders Uneasy about Medicare and Medicaid Cuts

September 14, 2001 – Lee Stillwell, an Inside-The- Beltway friend of doctors, writes the "Washington Report" for the Physicians Foundation. The Foundation is dedicated to defending and improved the private practice of medicine.
Here is his latest report, dated September 12. It shows the uneasiness among health care stakeholders contemplating consequences of Medicare and Medicaid cuts.

Well, the handwriting is on the wall. Medicare and Medicaid are on the budget chopping block big time as the deficit reduction super committee this week begins serious work on trimming federal deficits by more than $1.5 trillion by Thanksgiving.

Surprisingly, the committee now is being asked to target more cuts in programs like Medicare and Medicaid by members of Congress and President Obama.

Obama earmarked healthcare for even greater cuts in his speech last Thursday to a joint session of Congress and asked the 12-member bipartisan committee to increase its deficit-cutting goals by at least $447 billion to cover the cost of his proposed jobs bill with a mix of tax increases, spending cuts and reductions in the Medicare and Medicaid programs. The president promised next week to detail his proposed cuts.

“Now, I realize there are some in my party who don’t think we should make any changes at all to Medicare and Medicaid and I understand their concerns,” Obama said. “But with an aging population, and rising health care costs, we are spending too fast to sustain the program. And if we don’t gradually reform the system while protecting current beneficiaries, it won’t be there when future retirees need it. We have to reform Medicare to strengthen it.”

The super committee got a similar message from 25 centrist senators who urged participants to search for $3 trillion in cuts over a decade, twice the size of their current mandate! Sen. Joseph L. Lieberman (I-Conn.) said the centrists want to encourage the super committee “to reach for a higher number.” Quite frankly, even $3 trillion won’t do the job with the Congressional Budget Office (CBO) estimating the federal government will spend $4.69 trillion more than it collects in taxes the next 10 years.

Even though the committee is being told to be more ambitious, there are skeptics who question if the group even can reach consensus on the $1.5 trillion in cuts.

Matter of fact, there are healthcare lobbyists who are pushing for a stalemate because the alternative is a sequestration process that triggers automatic across-the-board reductions, considered less painful to health care programs. Medicaid would not be hit in the across-the-board reductions and Medicare only would take a two percent cut, amounting to $130 billion to $150 billion, much less than the committee is expected to do in an agreement.

Even a number of patient-friendly organizations favor the automatic cuts, believing it to be the lesser of two evils!

Meanwhile, numerous healthcare groups have moved quickly to implement strategies they hope will minimize cuts. Right now, the nursing-home industry has undertaken a multimillion ad campaign, claiming previous budget reductions already have crippled their effectiveness. TV ads now are running in Florida, Massachusetts, Michigan, Missouri, New Mexico, Nevada, Virginia and Washington. The Alliance for Quality Nursing Home Care and the American Health Care Association also are conducting a broad lobbying campaign.

The American Hospital Association (AHA) now is using its members to lobby Congress to change the Medicare eligibility age from 65 to 67 as a money-saving alternative that is estimated to save $124 billion. AHA officials, worried about additional cuts, estimate the triggered two percent cut in Medicare would cost hospitals $45 billion over nine years. They point out that this is on top of $155 billion in Medicare cuts hospitals face under the new health care law.

Not only do healthcare lobbyists face competition for the shrinking federal dollar from within their own industry, they must guard against a full frontal attack from defense industry lobbyists who face the same potential drastic cuts. The ongoing battle between both interests is being called a “Holy War” inside the beltway.

In the midst of all this intensity came the organization of the Joint Select Committee on Deficit Reduction with Democratic and Republican subcommittee members meeting separately behind closed doors on Capitol Hill last Wednesday. On Thursday, the committee successfully held an organization meeting and established ground rules. With Sen. Patty Murray (D-Wash.) and Rep. Jeb Hensarling(R-Tex.) as co-chairs, the group plans to hold its first public hearing tomorrow. Douglas Elmendorf, head of CBO, is scheduled to discuss the nation’s mounting deficits.

Meanwhile, behind the scenes, staff continues to look at ways to bring down Medicare and Medicaid costs which now make up 23 percent of federal spending. There are a number of options contained in staff memos for reducing cost, including increasing the Medicare eligibility age from 65 to 67, higher costs for seniors, cuts in provider payments, and a $120 billion reduction in payments to drug companies.

Not getting much attention, but in that pile of issues to be considered in the budget reduction process, are three issues crucial to the future of healthcare:

--Tricare, the Defense Department’s health insurance program which covers 9.6 million military personnel and dependents. The Administration for some time has looked here for potential savings.
----The Independent Payment Advisory Board (IPAB), a 15-member panel created in the new health law, which will have the power to make Medicare payment cuts that will take effect unless Congress overrules it. There are advocates who argue IPAB should be given more power to control spending while others, including most of the healthcare industry, argue for its repeal.

--The Sustainable Growth Rate (SGR), the method for Medicare payments to physicians, must be fixed by year’s end, or America’s doctors will receive a 29.4 percent pay cut! Organized medicine hopes for favorable committee action while many associated with the panel look at the issue as not part of their mandate.

Several boisterous protesters showed up at the committee’s organization meeting with signs which said, “Tax the rich!” and shouts of “Jobs now.” Committee members probably can expect more of the same as they proceed to cut programs valued by millions and millions of Americans, particularly in the healthcare area.

Tweet: The health care establishment – physicians, hospitals, and nursing home – are uneasy about impending automatic Medicare and Medicaid cuts.