Debt panel on the brink of failure

What no deal would mean for hospitals

Debt panel members have indicated that they likely will not reach an agreement by the end of Monday, increasing the chance of triggering billions of dollars in automatic cuts to health programs.

In several television interviews, Democrats and Republicans on the panel expressed doubt at the possibility of compromise. Republicans said Democrats want to rely too heavily on new tax revenue and will not accept significant cuts to entitlement programs, such as Medicare and Medicaid. Democrats said Republicans largely are unwilling to allow new taxes to balance spending cuts.

Aides to panel members said the group's budget talks have ended. "Put a bow on it. It's done," an aide to a GOP panel member said. If the panel does not finalize an agreement before Thanksgiving, $1.2 trillion in automatic spending cuts over 10 years will be implemented beginning in 2013. Specifically, the automatic cuts would reduce Medicare spending on hospitals by up to 2%, which Fitch Ratings last week said could slash average not-for-profit hospital operating margins by about 29%.

Lawmakers might try to block cuts

Some members of Congress want to prevent the automatic cuts from taking effect if the panel cannot reach an agreement, the AP/San Francisco Chronicle reports. Sens. Lindsey Graham (R-S.C.) and John McCain (R-Ariz.) are developing legislation to prevent cuts to defense spending. Meanwhile, House Republicans are considering similar initiatives, and Democrats have pledged that they will not allow domestic programs to be the only source of savings.

However, top lawmakers—including House Speaker John Boehner (R-Ohio)—have said the cuts should be carried out. Boehner said he feels "bound" by the debt agreement made last summer that established the cuts. In addition, President Obama has told members of the debt committee that he "will not accept any measure that attempts to turn off" the automatic reductions.

No debt agreement means more work on key programs

If a debt agreement is not reached, House and Senate leaders will have to take swift action on several key health programs that they hoped would be addressed by the debt panel, Roll Call reports.

Because the panel is unlikely to offer a plan to Congress, lawmakers must act quickly to address several issues, including a fix to the sustainable growth rate formula that calculates reimbursement for Medicare physicians. The most recent "doc-fix" bill, enacted in December 2010, is scheduled to expire on Jan. 1, 2012, at which point physicians face a nearly 30% payment rate cut.

According to Roll Call, with the expected failure of the debt panel, House and Senate leaders will have to move on individual legislation for each issue before lawmakers adjourn for recess in December (AP/Post, 11/20; Lipton, New York Times, 11/20; Fram, AP/Chronicle, 11/21; Shiner/Stanton, Roll Call, 11/21).

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