• 2 percent Medicare cut to providers
• Reduced funding for NIH, FDA, CDC
• SGR calculated 26.5 percent cut to Medicare providers
• Return to Clinton-era income tax rates
Why The Fiscal Cliff Is A Fiscal Heart Attack For Doctors
As the federal government continues negotiations over the fiscal cliff, this author details how threatened cuts in spending would have an adverse effect on physicians and various healthcare-related programs such as Medicare.
By now, we have all heard the doomsday language about the fiscal cliff. But what is it and how will it affect our practices?
The fiscal cliff is a combination of spending cuts and “sunset-ing” tax cuts that will occur on January 1, 2013. Unfortunately, this is a self-inflicted congressional injury. The spending cuts were negotiated in the Budget Control Act of 2011 and were designed to be so unpalatable that both sides of the ideological aisle would come together and vote on meaningful deficit reduction. The across-the-board cuts, termed sequestration, included reductions in mandatory spending like Medicare and other federal programs that the Democrats cherish and reductions in defense spending that the Republicans protect. President Obama agreed to sequestration in exchange for raising the debt ceiling, our nation’s borrowing limit.
Just so we are clear, the debt accrued that requires a rise in the debt ceiling is for spending that Congress already voted on, not new spending. So while some in Congress decry the borrowing limit, they voted on the spending that put us in this situation. Not raising the debt ceiling would be like refusing to pay your credit card bill after purchasing the goods.
The Budget Control Act called for Congress to create a super committee to reach an agreement with the president on $1 trillion in spending cuts over 10 years. An additional $200 billion will be saved in interest, so the grand total is $1.2 trillion in savings. That’s only $100 billion a year that has to be cut from our $3.6 trillion budget, or about 2.8 percent.
Well, the super committee failed, mandating an across-the-board $1.2 trillion in cuts. So instead of using a surgical scalpel to trim excessive or wasteful spending, Congress is using an axe to cut programs regardless of need. Each of the affected government divisions will see an 8.2 percent across-the-board cut. We will feel the effect in services like Air Traffic Control, Border Patrol, the National Park Service, the FBI, the Environmental Protection Agency, NASA, the National Weather Service and many others despite the potential public danger if resources are reduced.
Cuts to departments and services will have an immediate effect. The National Institutes of Health (NIH) will reduce medical research funding, impacting everything from cancer to diabetes to Parkinson’s disease research. The Centers for Disease Control and Prevention (CDC) will have to prioritize and may not be able to monitor for disease outbreaks as well. The Food and Drug Administration (FDA), which already cannot keep up with applications for new drugs and generic manufacturing, will be crippled. Food safety operations and animal inspections would suffer.
Medicare wouldn’t face the 8.2 percent cut but there would be a 2 percent cut to providers and institutions. While automatic cuts will not affect traditional Social Security, it will reduce disability insurance payments and processing. Medicaid is exempt from the cuts to take place on January 1.
The sustained growth rate (SGR) adjustment in Medicare providers’ reimbursements is also included as part of the fiscal cliff. The SGR calculation will result in a 26.5 percent cut for providers, in addition to any of the aforementioned cuts, on January 1, 2013. Frequently, Congress lets the deadline pass for the SGR fix before passing a temporary measure to extend the current rates. The Centers for Medicare and Medicaid Services (CMS) will hold payments to providers if it looks like that is the case so doctors need to be prepared for a one- to two-week halt on Medicare deposits.
Of course, if Congress works to avoid falling off the cliff, we would avoid many of the aforementioned scenarios but that doesn’t mean that we will not see a change in health-related programs. Whether we go over the cliff or not, Medicare and Medicaid benefits may see substantial changes as a result of negotiations.