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Published: Tuesday, 8/2/2011

Advocates, industry fear debt deal could open the way for big cuts to Medicare and Medicaid

BY RICARDO ALONSO-ZALDIVAR
ASSOCIATED PRESS

WASHINGTON — Medicare and Medicaid were spared from immediate cuts in the debt deal, but it looks like just a temporary reprieve.

Advocates for seniors and lobbyists for the health care industry are worried that Round Two of the budget battle, beginning this fall, could lead to cuts that raise costs for beneficiaries and squeeze providers such as hospitals, doctors, insurers and drug companies.

Nothing will be off limits for a powerful new congressional committee created under the deal to scour the budget for savings. That includes the two giant health care programs for 100 million Americans, the elderly, low-income people, and long-term nursing home residents.

If the debt committee hits a dead end, the agreement between President Barack Obama and congressional leaders decrees an automatic 2 percent cut to Medicare providers. That's on top of a 6 percent cut already enacted to finance the president's health care law, according to the nonpartisan Kaiser Family Foundation. And the earlier cut is still being phased in.

"The story isn't over," said Joe Baker, president of the Medicare Rights Center, a New York-based advocacy group. "The future of the programs really hangs in the balance. It could lead to deep cuts and irreversible changes to Medicare and Medicaid that shift costs to beneficiaries."

The hospital industry, which agreed to cuts of $150 billion to help pay for Obama's expansion of coverage to the uninsured, says it's just about had it. Nonpartisan analysts in the government predict the cuts in the health care law alone are enough to push about 15 percent of hospitals, nursing homes and home health agencies into the red.

"America's hospitals find it difficult to support a debt ceiling proposal that could negatively affect Medicare for our nation's seniors," American Hospital Association president Rich Umbdenstock said in a statement. "Access to care could be curtailed by further cuts to Medicare funding for hospital care."

The debt deal allows the government to keep borrowing and staves off an unprecedented default on obligations to investors, Social Security recipients, federal employees and others. But it comes at the price of squeezing the budget in ways that sooner or later will affect average families.

The first $900 billion in savings from the deal doesn't have much impact on health care. It's the second round that counts, from $1.2 trillion to $1.5 trillion over 10 years.

"These guys haven't really solved anything — they have only set up a procedure to make cuts," said Robert Laszewski, a health care industry consultant. "We haven't seen the blood on the floor yet."

The White House is emphasizing that Medicaid for the poor and benefits guaranteed to seniors under traditional Medicare would not be touched if automatic reductions become necessary as a backstop.

But the new congressional "supercommittee" created under the deal is under no such restrictions. It can shape its own menu of cuts to Medicare, Medicaid and Obama's health care law, assuming the panel could get the votes to pass a package through Congress and buy-in from the White House.

"Nothing is over. These debates are just going to continue," said Paul Van de Water, a senior analyst with the Center on Budget and Policy Priorities, which advocates for the poor.

For Medicaid, that means a new funding formula proposed by the Obama administration in the debt talks remains on the table. It can be used to dial down the amount of federal money states get for the health needs of their low-income people and nursing home residents. Governors oppose it.

For Medicare, it means the committee could push increases in copays and deductibles, as have two bipartisan commissions within the last nine months.

Medicare providers are nervous.

Doctors could be particularly exposed. Current law calls for an automatic cut of 30 percent in Medicare payments to physicians starting next year, the consequence of a previous budget control law gone awry. It's unthinkable that lawmakers would allow that big a hit. But where Congress in previous years just waived the cut and added the cost to the deficit, that's not politically possible now.

Doctors got a modest Medicare raise out of Obama's health care law, but the American Medical Association will have to pull off a lobbying coup to avoid cuts this time.

Drug companies are also hunkered down. Having agreed to help close the Medicare prescription coverage gap, as well as billions in new fees under the health care overhaul, they could now be on the hook for additional rebates to cover the drug costs of low-income seniors.

The budget supercommittee has a deadline for action around Thanksgiving. That has advocates mobilizing to stave off or contain the scope of cuts. One way to do that is to put tax increases back on the table.

"All of our work lies ahead of us," said Ron Pollack, executive director of Families USA, an advocacy group that battled for the health care overhaul.



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