AGA Washington Insider

A policy blog for GIs

Did I go to medical school so I could be sequestered?

As part of the debt ceiling agreement that was enacted in August, Democrats and Republicans agreed to the creation of the Joint Select Committee on Deficit Reduction or the “super committee,” which is charged with reducing spending. By Nov. 23, 2011, the super committee must produce detailed legislation that would achieve at least $1.5 trillion in additional deficit reductions over the period of 2012 to 2021.  

If a bill that reduces the deficit by an additional $1.5 trillion does not become law by Jan. 15, 2012, it will trigger sequestration. This is an automatic trigger, through which the director of the Office of Management and Budget, not the super committee, must make cuts to defense and non-defense programs sufficient to produce $1.2 trillion in savings over 10 years. The Medicare cuts cannot exceed 2 percent per year, and the automatic cuts explicitly exempt seniors, veterans and the lowest-income Americans from any increases in cost-sharing — meaning that the Medicare cuts can only come from provider payments. 

The super committee, which is co-chaired by Sen. Patty Murray, D-WA, and Rep. Jeb Hensarling, R-TX, held its first meeting after Labor Day. The 12 members of the panel appear optimistic that they will be able to reach an agreement. However, their task is quite daunting since they have a little over two months to reach an agreement and Congress has not exactly been swift in making tough budget choices this past year. 

So, as the super committee meets and negotiates on how to achieve $1.5 trillion in savings, the question for doctors is whether an agreement or sequestration is better? Chris Jennings, the former White House health-care policy advisor under President Clinton, asked that same question in an August 31 article in the New England Journal of Medicine. Mr. Jennings states that health-care providers may be better off with taking the known cut of 2 percent per year (sequestration) than worse cuts under an agreement from the super committee. In addition, since Medicare beneficiaries and Medicaid are exempt from the trigger cuts, are patient and consumer groups also hoping that the committee fails to reach an agreement?  

For gastroenterology, a 2 percent cut per year for 10 years would be on top of the already projected cuts to the sustainable growth rate formula (SGR) that will be nearly 30 percent on Jan. 1, 2012, unless Congress intervenes. The AGA has conducted meetings with some of the members of the super committee and has emphasized that any honest discussion about entitlement reform must take into account the $300 billion SGR “hole.”  While there is bipartisan support for a permanent fix to the SGR mechanism for physician reimbursements, the question remains whether this issue will be addressed by the super committee, as offsets to reform the SGR formula would be required in addition to the super committee’s required $1.5 trillion cuts. 

Meanwhile, possible Medicare cuts that have been floated for consideration are increases in the utilization percentage of imaging equipment, decreases in infusion drug reimbursement to average sale price plus 3 percent, and changes in the calculation of the consumer price index for ambulatory surgery centers. Other proposals include raising the eligibility age for Medicare, requiring drug manufacturers to pay Part D drug rebates, placing dual eligibles in Medicaid managed care plans, and reducing excess payments to hospitals for medical education. 

As one might imagine, many larger issues will impact whether or not the super committee is able to agree on a deficit reduction package.  

The Pentagon is nervous about a sequester that would cut as much as $500 billion in defense spending, on top of a $350 billion reduction dictated by the debt-limit bill. While tax increases may receive serious consideration, deficit reduction presumably will be scored relative to the standard current-law revenue baseline, which already assumes expiration of the Bush tax cuts at the end of 2012, and should take many of the most significant individual income tax revenue raisers off the table for now. The major question will be whether the Republicans will be willing to consider any revenue raisers along with the White House legislative proposals to stimulate job creation. 

While the devil will certainly be in the details, the question remains: should doctors prepare now to deal with the devil that we know — the 2 percent sequester and a likely cut in reimbursement — or the unknown?

(Picture by Jay Westcott/POLITICO)

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