Federal budget struggle raising anxiety for health care

By RICARDO ALONSO-ZALDIVAR, Associated Press Published: Dec 29, 2012 at 11:16 AM PDT Last Updated: Dec 29, 2012 at 12:40 PM PDT
Federal budget struggle raising anxiety for health care
In this Thursday, June 28, 2012 file photo, President Barack Obama speaks in the White House after the Supreme Court ruled on his health care legislation. (AP Photo/Luke Sharrett, Pool)
WASHINGTON (AP) — Confused about the federal budget struggle? So are doctors, hospital administrators and other medical professionals who serve the 100 million Americans covered by Medicare and Medicaid.

Rarely has the government sent so many conflicting signals in so short a time about the bottom line for the health care industry.

Cuts are coming, says Washington, and some could be really big. Yet more government spending is also being promised as President Barack Obama's health care overhaul advances and millions of uninsured people move closer to getting government-subsidized coverage.

"Imagine a person being told they are going to get a raise, but their taxes are also going to go up and they are going to be paying more for gas," said Thornton Kirby, president of the South Carolina Hospital Association. "They don't know if they are going to be taking home more or less. That's the uncertainty when there are so many variables in play."

Real money is at stake for big hospitals and small medical practices alike. Government at all levels pays nearly half the nation's health care tab, with federal funds accounting for most of that.

It's widely assumed that a budget deal will mean cuts for Medicare service providers. But which ones? How much? And will Medicaid and subsidies to help people get coverage under the health care law also be cut?

As House Speaker John Boehner famously said: "God only knows." The Ohio Republican was referring to the overall chances of getting a budget deal, but the same can be said of how health care — one-sixth of the economy — will fare.

"There is no political consensus to do anything significant," said Dan Mendelson, president of Avalere Health, a market analysis firm. "There is a collective walking away from things that matter. All the stuff on the lists of options becomes impossible, because there is no give-and-take."

As if things weren't complicated enough, doctors keep facing their own recurring fiscal cliff, separate from the bigger budget battle but embroiled in it nonetheless.

Come Jan. 1, doctors and certain other medical professionals face a 26.5 percent cut in their Medicare payments, the consequence of a 1990s deficit-reduction law gone awry. Lawmakers failed to repeal or replace that law even after it became obvious that it wasn't working. Instead, Congress usually passes a "doc fix" each year to waive the cuts.

This year, the fix got hung up in larger budget politics. Although a reprieve is expected sooner or later, doctors don't like being told to sit in the congressional waiting room.

"It seems like there is a presumption that physicians and patients can basically tolerate this kind of uncertainty while the Congress goes through whatever political machinations they are going through," said Dr. Jeremy Lazarus, president of the American Medical Association. "Our concern is that physician uncertainty and anxiety about being able to pay the bills will have an impact on taking care of patients."

A recent government survey indicates that Medicare beneficiaries are having more problems when trying to find a new primary care doctor, and Lazarus said that will only get worse.

Adding to their unease, doctors also face an additional reduction if automatic spending cuts go through. Those would be triggered if Obama and congressional leaders are unable to bridge partisan differences and strike a deal. They are part of the combination of tax increases and spending cuts dubbed the "fiscal cliff."

Medicare service providers would get hit with a 2 percent across-the-board cut, but Medicaid and subsidies for the uninsured under Obama's health care overhaul would be spared. The Medicare cut adds up to about $120 billion over ten years, with 40 percent falling on hospitals, according to Avalare's analysis. Nursing homes, Medicare Advantage plans and home health agencies also get hit.

The American Hospital Association says that would lead to the loss of hundreds of thousands of hospital jobs in a labor intensive industry that also generates employment for other businesses in local communities.

"It's very difficult to believe hospitals can absorb the kinds of numbers they are talking about without reducing service or workforce," said Kirby, the hospital association head. "You may decide that a service a hospital provides is not affordable — for example, obstetrics in a rural community — if you're making a little bit of money or losing a little bit of money by continuing to deliver babies in a rural community."

Independent analysts like Mendelson doubt that a 2 percent Medicare cut to hospitals would be catastrophic, but say it will cost jobs somewhere.

Even if there is a budget deal, the squeeze will be on.

The administration has proposed $400 billion in health care cuts so far in the budget talks, coming mainly from Medicare spending. That's only a starting point as far as Republicans are concerned. They also want to pare back Medicaid and Obama's health care law, and have also sought an increase in the eligibility age for Medicare.