Automatic Medicare Cuts In Debt Ceiling Deal Are Reminiscent Of Health Reform’s Reductions

If the final debt ceiling agreement makes significant concessions to Republicans in avoiding revenue increases and offsetting the increase with dollar-for-dollar spending cuts, the Democrats may have at least held the line in protecting entitlement programs from automatic across-the-board reductions. Gone are proposals to increase the Medicare eligibility age or block grant Medicaid spending to the states and in their place are the kind of changes advocated in the Affordable Care Act: reimbursement reductions to providers and insurers participating in the Medicare Advantage program.

The proposed legislation would raise the debt ceiling through 2012 by immediately cutting almost $1 trillion from mostly discretionary spending and establishing a joint congressional committee to recommend more than $1 trillion in further cuts. If the committee’s recommendations are not enacted, Congress would either have to approve a balanced budget agreement or accept an across-the-board cut in government programs, including Medicare and Medicaid. But those reductions won’t directly affect beneficiaries:

If the committee failed to reach its $1.8 trillion target, or Congress failed to approve its recommendations by the end of 2011, lawmakers would then have to vote on a proposed constitutional balanced-budget amendment.

If that failed to pass, automatic spending cuts totaling $1.2 trillion would automatically take effect, and the debt limit would rise by an identical amount.

Social Security, Medicaid and food stamps would be exempt from the automatic cuts, but payments to doctors, nursing homes and other Medicare providers could be trimmed, as could subsidies to insurance companies that offer an alternative to government-run Medicare.

Hospitals and doctors will complain about the possibility of future cuts, but as a general sense, it’s difficult to feel much sympathy for providers who will see an increase of revenue as a result of the coverage provisions in the Affordable Care Act. They, after all, can rejoice that Medicaid is exempt from the reductions — a great victory given that providers are already underpaid for their services and any additional cuts would further undermine access for beneficiaries. There just isn’t any real meet on the Medicaid bone.


One health care policy analyst I just spoke to suggested that providers can actually use the cuts to hasten the adoption of delivery and payment reforms — since the legislation establishes a cap but does not specifying how it’s to be reached. Still, most would likely find it easier to simply shift the cost to beneficiaries in the form of higher cost sharing etc…

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