Sequestration Cuts a Better Alternative for Providers

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Washington, D.C.’s latest episode of The Blame Game, sequestration, reaches it anticlimax tomorrow, and with it, $85 billion in automatic cuts will be made to the federal budget. Among these cuts, the Associated Press reports, is 2 percent in Medicare.

However, those who will be affected, such as hospitals and doctors, aren’t “raising a ruckus,” the AP notes, since “the pain could be a lot worse if President Barack Obama and congressional Republicans actually did reach a sweeping agreement to reduce federal deficits.”

As it will stand tomorrow, Medicare will be cut by approximately $100 billion over the next decade. Obama, however, had proposed $400 billion in healthcare cuts, and the Republicans were aiming even higher.

John Rother, president of the National Coalition on Health Care, told the AP, “What people were really worried about was the prospect of a huge deficit bill that could target Medicare for $400 billion or $500 billion.”

Avalere Health president Dan Mendelson concurs, saying “The healthcare industry fears the alternative more than they fear a predictable reduction in rates. They just do not want to roll the dice. That is why you do not hear as much of an outcry on Medicare.”

Besides, the doom-and-gloom healthcare predictions of recent years have proven to be less doomy and less gloomy than originally expected. For example, healthcare inflation “has slowed dramatically in the last few years, leading government number crunchers to scale back their estimates of future costs.” And, “the nonpartisan Congressional Budget Office has reduced its 10-year projections of Medicare spending by $137 billion, a liability wiped off the ledger without the need to cut reimbursements to hospitals and doctors, or to raise premiums for Medicare’s 50 million beneficiaries.”

Furthermore, when these automatic spending cuts were originally planned, any reductions in healthcare spending were specifically tailored to not hurt individuals and families, the AP writes, with Medicaid and healthcare reform’s “biggest subsidies” being exempted.

The Medicare cuts themselves primarily affect providers, such as health plans, drug companies, hospitals, doctors, etc. “Once the sequester takes effect, Medicare will reimburse them at 98 cents on the dollar,” the article adds. Seniors’ benefits and premiums won’t be affected, although Medicare Advantage enrollees might eventually see higher premiums.

Unfortunately, hospitals will be the ones chiefly affected, having “to absorb most of the automatic cuts—about 40 percent of the total.”

What is your opinion of these automatic cuts to Medicare? Have you made plans to compensate for these cuts, perhaps by not filling vacant positions or figuring out ways to reduce costs and streamline operations? Although both are unseemly options, do you see the sequestration cuts as the lesser of two evils in light of the separate cuts proposed by Obama and the Republicans?

-by Pete Fernbaugh

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