Will Pharma Be Part Of The Health Care Cuts In The Debt Ceiling Negotiations?

Politico’s Dan Nather has this handy guide of the health care cuts that could be included in the debt ceiling negotiations. He writes that industry groups that were shielded from reductions in the Affordable Care Act may be particularly vulnerable to seeing cuts now, since Democrats have promised to avoid direct benefit reductions. Some cuts that may already be part of the deal, via New York Times’ Robert Pear:

Gradually eliminate Medicare payments to hospitals for bad debts that result when beneficiaries fail to pay deductibles and co-payments. Medicare reimburses hospitals for 70 percent of such debts after the hospitals make reasonable efforts to collect the unpaid amounts.

Reduce Medicare payments to teaching hospitals for the costs of training doctors, caring for sicker patients and providing specialized services like trauma care and organ transplants. Medicare spends $9.5 billion a year for its share of those costs.

Reduce the federal share of payments to health care providers treating low-income people under Medicaid and the Children’s Health Insurance Program. The administration wants to establish a single “blended rate” for each state. The federal government now reimburses states at different rates for different groups of people and different services in the two programs.

Obama’s blended rate proposal is basically a cost shift to the states and beneficiaries, and is possibly the most troubling of the three provisions. As for the first two: the hospitals have launched a massive ad buy to forestall the cuts, but 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.


Thomas Scully, who ran CMS from 2001 to 2004, has argued that “hospitals are probably the biggest winners” from health reform — “They got hardly touched and got a lot of new money.” The Tennessee Hospital Association’s (THA) concluded that even after accepting $155 billion in cuts in the Affordable Care Act, hospitals will net about $16 billion from reform. “The breakdown estimates that the industry will receive additional money of about $171 billion over those same 10 years as a result of reimbursements for newly insured patients…In other words, the hospitals would give up $155 billion in cost cuts, but take in $171 billion in new money — a net gain of $16 billion,” the association estimated.

Big Pharma also did well — recall that they put $80 billion on the table to help pay for the Affordable Care Act but successfully forestalled measures that would have allowed Medicare to bargain for cheaper drugs and extended drugmakers’ Medicaid rebates to the “dual eligibles.” If Pear’s article is any indication of what the current deal looks like, pharma still isn’t providing any additional savings.