Congress’s most recent spending battle left the health industry with some nicks and scratches, but it’s leery of having to hand over even bigger savings in the next battle looming two months from now.
From hospitals to doctors to insurers to drug makers, industry players are expecting they’ll come up in the mix as lawmakers search for ways to pay for another deal to avert sequestration and increase the debt limit.
Some of the biggest ideas for cutting health care spending got pushed to the side when President Barack Obama and Congress turned their attention to cutting a smaller fiscal cliff deal. But now, Republicans say they’ll insist on real spending cuts in the debt limit-sequestration fight. And if Obama continues to resist big entitlement changes, the health care industry could be in for another round of cuts.
“In many ways, we’re kind of in the same place as before but there are just different drivers in relation to this cliff,” said Rick Pollack, executive vice president at the American Hospital Association. “A lot of the same issues are likely, unfortunately, to raise their head again.”
Here is a guide to what’s at stake for the health care industry in the next round:
Doctors are breathing somewhat easier now that Congress has averted dramatic cuts in their Medicare payments for another year — and paid for it without seriously docking them elsewhere.
Physician groups feared lawmakers would fund the “doc fix” by eliminating a part of the health care law that boosts Medicaid payments for primary-care services up to Medicare levels for two years. Medicaid is notorious for paying doctors low rates — typically about two-thirds as much as Medicare pays — which is one reason the program’s low-income patients have trouble finding doctors who will treat them.
Instead, lawmakers pieced together a smorgasbord of savings that cut payments to hospitals and other providers. But that doesn’t mean they won’t return to the idea when the hunt is on for entitlement savings.
Temporarily increasing Medicaid payments was intended to improve access to care for low-income patients. But with a nearly $12 billion price tag, the measure offers lawmakers a source of savings if they so choose.
Doctors also worry that lawmakers might dip into funding for medical training, an idea that has been backed by Obama and his 2010 deficit-reduction commission.
As the single largest funder of graduate medical education, the government could save a lot if it reorganized and sliced down some of the program’s payments. Consolidating spending on graduate medical education into a grant program would save $70 billion over the next decade, according to the Congressional Budget Office.
But doctors groups — who rely heavily on government assistance to keep teaching hospitals filled — say cutting education spending would further reduce the supply of doctors in the U.S., which is already in jeopardy.
They feel like they were gouged in the fiscal cliff plan, since they’re being required to cough up $14 billion to stop the cuts to physician payments that had been scheduled under the Medicare payment formula. And they’ll push back hard against any further cuts in another deficit-reduction plan.
Their bottom line? In the past three years, they’ve been on the hook for $95 billion in cuts, including the still-pending sequestration cuts. They can’t handle any more cuts, they say, without patient care suffering as a result.
Many hospital cuts have been proposed in prior deficit-reduction plans and could be resurrected, including cuts to hospitals for outpatient treatments, cuts to payments to help hospitals cover unpaid medical bills and cuts to graduate medical education. They could also get trimmed by cuts to rural providers or reductions in “market basket” updates — or updates in the cost of goods and services.
Jeff Cohen, an executive vice president at the Federation of American Hospitals, said hospitals will be pushing back strongly against further cuts.
“We’ll make our case that the $95 billion in cuts we have endured the last three years is untenable,” he said. “We must have more thoughtful policies, or it will fundamentally change how hospitals are able to meet the health care and economic needs of their communities. These cuts directly impact technology and people.”
The pharmaceutical industry dreads a potential measure that would require it to cough up more drug discounts but save the government a pretty penny.
By essentially requiring a substantial discount from makers for the drugs used by those qualifying for both Medicaid and Medicare — the so-called dual eligibles — the government could potentially save $112 billion over a decade, the CBO has said.
The sizable savings is likely to tempt lawmakers. And beyond that, it could get bipartisan support.
Obama suggested dual-eligible rebates in his deficit-reduction plan last year, after it was also proposed by his deficit commission. And during the 2011 debt ceiling negotiations, some Republicans indicated possible support for the idea as long as it was part of a whole package, while Democrats were divided over the issue.
But the industry says it’s already contributed plenty toward health care savings.
Companies have paid a Medicaid drug rebate for years, and that was recently increased under the health care law. The law also instituted a new rebate to help close the “doughnut hole” — the gap in Medicare prescription drug coverage — and an industry fee based on each company’s annual revenues.
In total, the health care law is expected to cost the drug industry about $85 billion over 10 years, according to Moody’s Investors Service analysts.
The insurance companies are most concerned about seeing cuts to Medicare Advantage and Medigap plans — two programs that don’t have a lot of friends among Democrats.
The White House, the Simpson-Bowles deficit commission, the Medicare Payment Advisory Commission and the CBO have all recommended some version of restricting Medigap plans, typically by applying a penalty to plans that provide coverage for the “first dollar” of care. Their argument is that consumers need to have to pay at least something toward their care — otherwise, they would agree to any test or treatment, no matter the cost.
The CBO would go the furthest of all proposals, and actually ban Medigap plans from offering coverage for a beneficiary’s first $550 of out-of-pocket spending. That would save $53.4 billion.
Insurers also don’t want to see more cuts to private Medicare Advantage plans, which are already facing deep reductions from the health care law as well as a smaller hit in the fiscal cliff deal. Previous deficit-reduction proposals have weighed introducing new audits into Medicare Advantage or repealing bonuses for quality.
Odds and ends
Many other parts of health care have been mentioned for cuts, particularly the home health and nursing home sectors. In particular, many deficit-reduction plans have called for requiring great cost-sharing for home health services, rehabilitative therapies or a stay at a nursing facility. Others have called for more competitive bidding on medical equipment or reducing payments for clinical lab treatments and advanced imaging tests.
Editors Note: HCAF’s discussions with congressional lobbyists have made it clear that the home health care industry’s advocacy efforts during the recent fiscal cliff discussions were instrumental in avoiding a copay. Thank you to those of you who sent emails and made phone calls to Congress…your voice made a difference!
While we dodged a copay this time around, cost sharing will most certainly be a part of the equation when Congress resumes its discussion next month about how to cut federal spending. In short – now is not the time to be complacent! Click the button below and tell your representative and senators that the home health care industry saves Medicare money and that a copay would be harmful to seniors, spending and to thousands of providers, many of which are small businesses, in a time when our industry is booming and jobs are sorely needed. TAKE ACTION NOW!