Health care providers and patient advocates are anxious over pending cuts to federal health programs next year if Democrats and Republicans can’t strike a deal on budget cuts and taxes by Dec. 31.
Unless Congress can agree on at least $1.2 trillion in program cuts, wide-ranging reductions in domestic and defense spending, known as “sequestration,” will begin Jan. 2.
Some services are exempt, such as veterans’ health programs, Medicaid and the Children’s Health Insurance Program. Funding for the main provisions of the 2010 health care law doesn’t begin until 2014, so it also wouldn’t be affected by the 2013 sequester.
But money for crucial services such as community health centers, HIV and AIDS programming, bio-medical research, disease control and prevention, and the regulation of food, drugs and medical devices would face reductions of 8.2 percent beginning next year if Congress and the White House fail to reach a compromise.
Although similar sequester scares have been averted after serious negotiations, Tim Westmoreland, a law professor at the Georgetown University Law Center, wasn’t optimistic.
“This doomsday machine is going to go off this time,” said Westmoreland, who headed the Medicaid program in the final years of the Clinton administration.
If he’s right and President Barack Obama issues a sequester order on Jan. 2, Medicare would impose a 2 percent cut on payments to providers and insurers a month later.
Monthly payments to Medicare prescription-drug plans and Medicare Advantage plans – the private plans that provide Medicare benefits – also would face a 2 percent reduction, said Lisa Potetz, a principal with Health Policy Alternatives, a private consulting firm.
Medicare administrative spending would be subject to the same 8.2 percent cuts faced by most other non-defense agencies, as well, Potetz added.
In September, the Office of Management and Budget estimated that the reductions would take $11.6 billion from Medicare’s budget in 2013. The cuts would total $99 billion if the sequester were in effect for the full nine years as current law provides, according to the Congressional Budget Office.
That’s far less than the 10-year $400 billion reduction in the program that Obama envisions as part of his new proposal to avert sequestration. But an $11.6 billion funding cut would have serious consequences nonetheless.
While benefits wouldn’t be cut directly, the impact of reductions in revenue to health care providers and their effects on beneficiaries are unclear. Some worry that the 2 percent cut might lead doctors to shun Medicare patients.
That possibility that would only increase if Congress fails to prevent a separate 27 percent cut in Medicare physician-payment rates that’s scheduled to take effect Jan. 1.
Congressional action has prevented this rate reduction, triggered by Medicare’s inability to meet its targeted expenditures, for the last 11 years, and it’s almost certain to be skirted again for 2013.
Nevertheless, Potetz said it only added to the pressure lawmakers faced to strike a “fiscal cliff” deal early in order to avoid any disruptions in payments to Medicare providers.
“It’s in everybody’s interest, if it’s going to be fixed, to fix it as soon as possible,” she said.
A study commissioned by the American Medical Association, the American Hospital Association and the American Nurses Association estimates that nearly 500,000 jobs would be lost or not created in 2013 if the 2 percent sequester cuts for Medicare go through.
More than 40,000 of these positions would disappear from the offices of doctors, dentists and other providers, the report found.
California would be hit the hardest, with an estimated 51,000 jobs lost because of the Medicare reductions. Florida would lose about 36,000, while New York and Texas each would lose about 32,000 jobs.
Medicare’s payments to skilled-nursing facilities would face a $782 million cut next year under the sequester, according to an analysis by Avalere Health and the Alliance for Quality Nursing Home Care.
Again, California, Florida and Texas would face the biggest cuts, at $76 million, $66 million and $51 million, respectively. Payments to facilities in Illinois would be trimmed by roughly $46 million, while those in Pennsylvania face a $37 million cut and North Carolina eyes a $22.5 million reduction.
Here’s how other federal health programs might be affected:
COMMUNITY HEALTH CENTERS
The 8,500 centers would see about 1.3 million fewer low-income patients next year if $167 million in funds is cut, according to the National Association of Community Health Centers.
“We know we’d have layoffs and we know we’d have decreased access and we know that patients, especially uninsured patients, would start to use (hospital) emergency rooms. There’s no ambiguity on our part,” said Brian Toomey, the chief executive officer of Piedmont Health Services of Carrboro, N.C., which operates seven community health centers in the state and might lose about $500,000 in federal aid next year. “The average Piedmont patient typically comes three times a year at half the cost of a single emergency-room visit. “
NATIONAL INSTITUTES OF HEALTH
It would lose $2.5 billion in fiscal year 2013, resulting in about 2,400 fewer bio-medical research grants, according to a report by the Democrats on the House of Representatives Appropriations Committee. The NIH invests about $31 billion a year in research.
FOOD AND DRUG ADMINISTRATION
The FDA might see a loss of $318 million next year, even as its number of inspectors has grown by more than 8 percent over the last two years. The testing of food, drugs and medical products from other countries probably would suffer. So would the evaluation of new drugs.
“So the one-year review period that FDA is trying to get at for most products, the average drug-approval time is going to slow for those products,” said Westmoreland, the law professor. “And somebody out there is waiting for an approved oncology drug to come onto the market.”
These programs, along with services to fight viral hepatitis, would lose $659 million, resulting in more than 400 people with HIV not being diagnosed, while 5,000 low-income households with AIDS patients would lose federal housing support, according to the National Minority AIDS Council, the Foundation for AIDS Research and the National Alliance of State and Territorial AIDS Directors.
The federal AIDS Drug Assistance Program provides anti-retroviral medications for low-income people. An 8.2 percent funding cut would mean 15,700 fewer people served under the program, according to AIDS prevention groups.
“I would point out that most of those people have no place else to go for the drugs that they need," Westmoreland said. "For them, AIDS will no longer, during the sequester, be a manageable medical condition.”
HEALTH CARE LAW
While the sequester wouldn’t affect the main portions of the Affordable Care Act, such as premium subsidies for individuals and cost-sharing subsidies for the poor, funding for the Prevention and Public Health Fund and the National Health Service Corps would face a 7.6 percent funding cut in 2013, according to the Association of American Medical Colleges.
The fund, which was created by the 2010 law, has provided more than $1.2 billion in grants for local programs to help fight chronic disease, obesity, tobacco use and other health problems. The service corps repays student loans and provides scholarships for health care providers who agree to work for two years in areas that are short of caregivers. Additional money through the health care law boosted the service corps’ funding to $229 million in 2012 and has nearly tripled program enrollment since 2008.