How Will Debt-Ceiling Deal Affect Medicare for Patients, Doctors?

Medicare is one of the programs that may be targeted for funding cuts. Photo by Justin Sullivan/Getty Images

At least one sector of the economy seems to have boycotted the national sigh of relief that accompanied the 11th-hour debt deal this week. With unspecified cuts to Medicare looming, most doctors and hospital employees say they’ll keep holding their breath.

While the initial deal doesn’t include any immediate cuts to popular entitlement programs like Medicare and Medicaid, health care analysts say the 12-member “super committee” charged with slashing federal spending by $1.5 trillion could make significant changes to the programs.

Those changes could be wide-ranging, including an increase in the Medicare eligibility age and a jump in co-pays and deductibles. State Medicaid mandates could be relaxed, achieving savings by lowering benefits to low-income individuals. Even some elements of the health care reform law could be considered.

Other prime targets for Medicare could include cuts to Medigap insurance, which would limit supplemental insurance plans for the elderly, and the implementation of a policy requiring high-earning seniors to pay higher premiums for their plans. Such measures were considered by both sides of the aisle during this summer’s negotiations and are likely to be on the table again.

If the committee gridlocks and fails to act, a trigger will be activated to cut spending by $1.2 trillion across the board for a wide array of federal programs, including a 2 percent cut to Medicare provider payments starting in 2013. In that case, Medicaid and Social Security would be spared.

While the White House stresses that “any cuts to Medicare would be capped and limited to the provider side” for the automatic cuts, health policy analyst Robert Laszewski calls that “baloney.”

“If we saw physicians take a hit on their fee schedule, many would at least stop taking new Medicare payments. The notion that Congress can cut that much to physicians with no impact on patients is ridiculous,” he said. “Every single time physicians get cut, they try and shift costs elsewhere.”

Judy Feder, a senior fellow at the Urban Institute and a former dean of the Georgetown Public Policy Institute, said that the super committee would be better served to look at ways of reducing spending across the entire health care system. Under the Affordable Care Act, she said, Medicare’s growth has already dropped significantly

“Although there may be room for broader reform in Medicare, we’ve gotten so focused on rhetoric about entitlement reform, what’s often lost is that the problem is overall health care spending,” she said. “And that requires changes across the system, not simply in Medicare.”

It’s unknown whether the super committee will be able to tackle such a comprehensive problem in a matter of months. Many health care watchers say the 2 percent cut is therefore a foregone conclusion. Among them, Joseph Antos, a scholar at the American Enterprise Institute, believes the super committee “will almost certainly fail.”

“They’re being asked to come up with $1.2 trillion in cuts by Thanksgiving, and I don’t think the turkey’s big enough to slice that way,” he said. “If they don’t fail, the odds that both the House and the Senate will enact the deficit cutting plan they come up with are virtually zero.”

“Although there may be room for broader reform in Medicare, we’ve gotten so focused on rhetoric about entitlement reform, what’s often lost is that the problem is overall health care spending.”
Judy Feder, senior fellow at the Urban Institute

But according to many physicians, much more menacing than the 2 percent cut is the simultaneous threat of a 29.5 percent cut to their Medicare payments if Congress doesn’t alter the Sustainable Growth Rate. Better known as the “doc fix,” the adjustment has been required almost every year since Congress established an unworkable formula for Medicare reimbursement in 1997. If the current political climate causes lawmakers to forgo the annual patch, payments to doctors would drop so low that many would be forced to stop seeing Medicare patients.

Fixing the problem for 2012 alone could cost $12.1 billion, according to the Congressional Budget Office. A 10-year fix could top $358 billion — a tough sum to scrounge up when Congress is searching for cuts in the trillions. The situation could “pose significant challenges in addressing the SGR problem,” according to an internal American Medical Association email that leaked to the media on Monday.

Roland Goertz, a family physician in Waco, Texas, and president of the American Academy of Family Physicians, said doctors are generally willing to cope with the potential 2 percent cut in the debt deal. “From our perspective, to fix the debt problem, we all have to help,” he said.

On the other hand, the precarious prospect for the “doc fix” is making it difficult for many physicians to map the immediate future, he said. “Planning and budgeting at this point for a practice is almost impossible to do depending on where you are and what percentage of Medicare patients you have,” he said.

Goertz’s group represents nearly 95,000 physicians and medical students throughout the nation, and an online poll of some of its members last fall found that nearly three-fourths “would limit Medicare appointments” if the scheduled 23 percent Medicare pay cut went into effect. About 62 percent said they would stop taking new Medicare patients and approximately 13 percent said they would close shop altogether.

“If 50 percent of your business is Medicare and the SGR would decrease your payments by 30 percent, it makes it kind of difficult to understand how you’re going to continue operating with that segment of your business,” Goertz said. “In some of these areas where 50 percent of patients are on Medicare, some physicians may decide that it makes more sense to close and move to an area with a different patient mix.”

And that, he said, would mean entire areas of the country would be left without any kind of medical access.

But the outlook for the medical community isn’t all bad, Laszewski said. He has faith that Congress will do something “to make the docs whole” and he believes the political insulation that the super committee will enjoy could help the board come up with better ideas to reduce health care costs.

“This changes the dynamic in ways that I don’t think people could have even imagined a week ago,” he said. “And that’s a wonderful thing. I think now the committee has a chance to make the right decisions rather than just the decisions forced by politics.”

Find more coverage on our health page.