Sneak peek of '2011 in Review': The debt supercommittee

A high-profile effort to cut spending dramatically fails

  • Which stories shook up health care in 2011? Stay tuned for the Daily Briefing's Year in Review, which will run in full on Thursday, Dec. 22.

Juliette Mullin, Staff Writer
Dan Diamond, Managing Editor

For a brief moment, it seemed possible—maybe even plausible—that Congress' "supercommittee" would work out a deal to cut federal spending by billions.

But after a few weeks, it became clear: the chances of that happening were less than super. The panel's eventual failure to reach a deal in November triggered a series of across-the-board budget cuts, with stark consequences for hospitals.

Supercommittee, assemble
Of course, it was probably unfair to expect much from the supercommittee. The bipartisan, bicameral panel was created in August as a last-ditch effort to avoid a federal default on debt obligations.

As Daily Briefing readers will recall, White House officials and congressional leaders spent months struggling to finalize a budget and deficit-reduction deal to increase the government's current borrowing cap of $14.3 trillion by Aug. 2. They eventually settled on an agreement that called for federal discretionary spending cuts totaling about $2.4 trillion across the next decade, while raising the debt ceiling in two stages.

The agreement also tasked the new supercommittee with identifying another $1.5 trillion in cuts by Thanksgiving. And before its collapse, the panel captivated health care stakeholders for weeks, as legislators reportedly considered various health care cuts and potential reform to the Medicare physician reimbursement formula.

Automatic cuts could slice hospital margins by 29%
But the supercommittee's failure means that $1.2 trillion in automatic spending cuts will instead take effect in 2013.

But the supercommittee's failure means that $1.2 trillion in automatic spending cuts will instead take effect in 2013.

Medicare will experience up to 2% in across-the-board cuts, standing to significantly affect hospital reimbursement. According to Fitch Ratings, the triggers could slash average not-for-profit hospital operating margins by about 29%.

The panel's failure also is expected to increase future pressure to rein in health care spending, which represents about one-fifth of the federal budget. Potential proposals could include raising copayments, premiums, and other costs for Medicare beneficiaries.

However, the supercommittee's failure does have a silver lining, in the short term: the automatic cuts to Medicare are significantly less than the $500 billion to $700 billion in health cuts that likely would have been included in a debt deal.


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