Health Care and the Super Committee – The Cost of Failure

Joe Paduda

Posted 11/18/11 on Managed Care Matters

The chances that the Congressional Super-Committee will achieve its stated goal of cutting $1.5 trillion from federal expenditures over the next decade are fading fast.

What happens when the six Republicans and six Democrats can’t agree on cuts?

Big – really big – increases in costs for health plans and workers comp payers. I’ll get to that in a minute, but first let’s walk thru what happens if the Supers can’t agree.

Theoretically automatic, almost-across-the-board cuts in military, entitlement program, and ongoing operational budgets go into effect 1/1/2013.

Don’t bet on it.

The threat of across-the-board cuts was supposed to motivate/force the Supers to hammer out their differences and get to a solution. All reports indicate that isn’t going to happen, as the Republicans refuse to contemplate any form of tax increases and Democrats, who believe they’ve given enough on the entitlement side, refuse to go further unless the GOP budges on taxes.

The looming threat of across the board cuts has become a good deal less likely to happen as politicians on both sides acknowledge that the threat is just that – a threat – and not much more. As with any bill passed by Congress, the threat can be overturned when/if Congress passes another bill overturning the original law.

That’s probably what the GOP members are banking on. If they are able to maintain control of the House, take over the majority in the Senate, and win the Presidency in next fall’s elections (a distinct possibility), Republicans will be able to do what they wish. I’d expect immediate action to rescind cuts in military spending, extend the Bush tax cuts for top earners, and slash entitlement spending.

From a political perspective, it’s hard to see the GOP members of the Super Committee agreeing to ANY agreement that could be construed as increasing taxes. And that’s exactly what is required to reach a deal with their Democratic colleagues.

So, what does this mean for health care?

My sense is the biggest short term effect may well be on Medicare physician reimbursement. Remember, there’s no solution on the table for the 27.5% cut in Medicare physician reimbursement scheduled to take effect in exactly six weeks. There’s little focus on this as all eyes are on the Supers, but that will change in early December as the AMA marshals its forces to attack Congress. I don’t see a solution before the end of the year, so get ready for an increasingly nasty and public screaming match as politicians of all stripes seek to blame someone else.

If this gets really vitriolic, we could be looking at massive physician ‘dis-enrollment’ from Medicare.

Both parties will try to develop short term solutions to kick the can even further down the road, but the SGR issue (the shorthand term for Medicare’s physician reimbursement ‘methodology’), as big as it is, is nowhere near as significant, nor as important politically, as the budget battle.

What does this mean for you?

If the cuts go into effect, cost-shifting to private payers is going to explode from today’s already outrageous level to pone that will drive trend rates through the roof.

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