Automatic federal budget cuts could mean 2% cut in reimbursements to providers

“Sequestration” budget cuts agreed to last year could mean across-the-board reductions in Medicare payments to hospitals and doctors starting in January 2013.

Medicare providers would see reductions of about $11 billion beginning in January as part of series of automatic spending cuts set to begin next year unless Congress acts to halt them, according to estimates released Friday by the White House Office of Management and Budget.
The numbers came in a report that details how federal agencies would implement roughly $110 billion in mandatory, across-the-board budget cuts agreed to by Congress and President Barack Obama last August as a way to end a bitterly partisan dispute over raising the debt ceiling. Lawmakers in both chambers, as well as Obama, want to avoid the automatic cuts that would trim federal spending by $2.1 trillion over the next 10 years, called sequestration.

Noting that “sequestration would have a devastating impact on important defense and nondefense programs,” the administration detailed cuts to more than 1,200 federal government budget accounts. Half the cuts would come from military programs. Social security and Medicaid are exempted.

“The sequestration itself was never intended to be implemented,” the Office of Management and Budget said in the report. “The Administration strongly believes that sequestration is bad policy, and that Congress can and should take action to avoid it by passing a comprehensive and balanced deficit reduction package.”

In the case of the cuts to Medicare, beneficiaries would see no changes in their benefits, but providers, including doctors and hospitals, would see an across-the-board 2 percent cut to reimbursements. One report funded by doctors, hospitals and nurses groups predicted that would result in the loss of an estimated 496,000 jobs during the first year.

Here are other resources on the sequestration:

  • In addition, the National Institutes of Health “would have to halt or curtail scientific research, including needed research into cancer and childhood diseases,” the report states.

    “This report confirms what the public health community has long known – that mandatory budget cuts to domestic programs set to take effect Jan. 1 would deprive medical research and disease prevention programs of critical federal dollars needed to fight life-threatening diseases such as cancer,” said Christopher W. Hansen, president of the American Cancer Society Cancer Action Network.

    Beyond the 2 percent cuts to Medicare, the report says other non-exempt nondefense mandatory programs would be cut 7.6 percent, and non-exempt defense mandatory programs would be cut 10 percent.

    Lawmakers could still act to stop the cuts if they think doing so is in their best interests. In order to avoid a government shutdown in the middle of election season, party leaders in both chambers just cut a deal to prevent the government from running out of money when the fiscal year ends in September. The House voted yesterday to approve the six-month package and the Senate is expected to send it to Obama next week.

    Despite House Speaker John Boehner’s comments to the contrary – he said earlier this week he was “not confident at all” that Congress could cut a deal to avoid the automatic cuts in January – many analysts believe that lawmakers will pass a temporary reprieve because the cuts are disliked so much by both parties.

    Correction: A previous version of this article had the author listed incorrectly. This post is from Kaiser Health News and was written by Mary Agnes Carey.

    [Red hospital sign image from Big Stock]