After Super Committee meltdown, what's next?

Health leaders brace for deeper cuts

The Super Committee has failed to reach a deal—and triggered billions of dollars in spending cuts—but experts warn that more health rollbacks loom as lawmakers continue to search for a federal deficit fix.  

The 12-member supercommittee—which was tasked with developing and passing at least $1.2 trillion in federal spending cuts over 10 years—on Monday announced that it would "not be possible to make any bipartisan agreement available to the public" before its Thanksgiving deadline, citing an "inability to bridge the committee's significant differences."

Failure triggers across-the-board Medicare cuts

The panel's failure will trigger $1.2 trillion in automatic spending cuts over 10 years beginning in 2013, which will reduce Medicare spending by 2%, or $123 billion.

The cuts are expected to have the biggest impact on hospitals, which receive nearly 50% of Medicare funding. According to Fitch Ratings, the triggers could slash average not-for-profit hospital operating margins by about 29%. Hospital company stocks, including Health Management and HCA, on Monday dropped with the overall market in anticipation of the committee's announcement.

  • Regardless of whether automatic spending cuts actually go into effect in 2013, maintaining financial viability over the long term will require hospitals and other health care providers to take strategic action beyond cutting costs.  The Health Care Advisory Board's Medicare Breakeven Project offers best practices and resources for helping members achieve the new performance standard.

For physicians, the panel's failure also represents a missed opportunity to overhaul the widely panned Medicare sustainable growth rate formula. Since 2002, Congress annually has passed a series of short-term bills to block scheduled cuts to Medicare reimbursement rates under the formula. The most recent "doc-fix" bill, enacted in December 2010, is scheduled to expire on Jan. 1, 2012, at which point physicians face a 27.4% payment rate cut.

"The failure of the deficit committee forces our nation to continue on an unsustainable path that puts current and future generations of Americans at risk for harsh consequences," American Medical Association President Peter Carmel said. He added that the scheduled reimbursement cut likely "will force many physicians to limit the number of Medicare … patients they can care for in their practices."

Smaller cuts now may mean larger cuts later

The automatic cuts are significantly less than the $500 billion to $700 billion in health cuts that likely would have been included in a debt deal, Reuters reports. However, the failure to reach an agreement this year likely will increase future pressure to rein in health care spending, which accounts for roughly one-fifth of the federal budget, Kaiser Health News reports.

"Congressional staffers and members have been pretty direct with health care industries: If you're not on the list now, you probably will be later," said financial analyst Ipsita Smolinksi.

Future proposals could include raising copayments, premiums, and other costs for Medicare beneficiaries, Reuters reports. Meanwhile, hospitals could lose $20 billion in federal funding to cover bad debts and $9 billion in Medicare funding for medical education (Morgan, Reuters, 11/21; Steinhauer, et al, New York Times, 11/21; Montgomery/Kane, Washington Post, 11/21; Walker, MedPage Today, 11/21; Baker, "Healthwatch," The Hill, 11/21; Lowes, Medscape Medical News, 11/21; Werber Serafini/Carey, Kaiser Health News, 11/20).

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