First posted 8/2/11 on Managed Care Matters
Now that the debt limit deal is done, the hard stuff starts. While there’s been a lot of focus on the Pentagon budget and lack of revenue increases, the real heavy lifting will come when the super-committee convenes to figure out how to save the next $1.2 trillion. And their focus will be on Medicare, Medicaid, and provider reimbursement.
Because that’s where the ‘super-committee’ is going to have to find a big chunk of the additional savings required by the deal.
With Medicare and Medicaid accounting for a large and ever-increasing part of the deficit, by necessity the super-committee is going to have to look at provider reimbursement. As Bob Laszewski points out, they don’t have time to fundamentally alter reimbursement methodology, can’t change the eligibility parameters under the terms of the deal, and they are starting from a deficit projection that assumes the pending 29.5% cut in physician reimbursement is actually going to happen.
The 29.5% alone accounts for about $300 billion, so the super-committee has to find another $1.2 trillion on top of that $300 billion.
Where’s it going to come from?
Physician reimbursement under Medicare and Medicaid is going to get hammered.
Hospitals are going to see substantial cuts in reimbursement as well.
Pharma and PBMs participating in Part D are another big target, and one with less political pull in DC.
Insurers heavy in Medicare Advantage have been reporting nice earnings of late; that’s not going to escape the notice of deficit-cutters in Washington.
Expect to see means testing for Medicare as well.
What are the chances we see substantial cuts in reimbursement? I’d say about 100%.
Without higher revenues and given the requirements of the debt limit deal, there’s no other place to cut the hundreds of billions needed, and do so by Thanksgiving.
What does this mean for you?
Cost-shifting was a problem before this deal. It is about to become THE problem for private payers and workers comp insurers.
Joe Paduda is a health care analyst writing at Managed Care Matters.