Debt deal raises pressure on Medicare providers

Washington policymakers demanded more savings from hospitals, doctors and other medical providers in the debt deal President Obama signed Tuesday, a move designed to protect seniors and others who rely on Medicare.

But the budget cutting may end up hurting some of the neediest seniors as the federal cuts take a disproportionate toll on family physicians with many elderly patients and on hospitals that serve them.

Medicare is among many government programs, including the military, that could face significant cutbacks as a result of the debt compromise.

Advocates for the elderly say the Medicare cuts, though relatively small, could force medical providers to scale back services, or even stop serving them entirely.

“These kinds of cutbacks do build, and you are always wondering if this is the straw that breaks the camel’s back,” said Joe Baker, president of the Medicare Rights Center, a New York-based advocacy group.


The debt compromise will not impose any immediate cuts in Medicare spending. But if Congress does not come up with a plan by the end of the year to reduce the deficit by $1.5 trillion over the next decade, the plan requires the federal government to impose a 2% across-the-board reduction in payments to Medicare providers starting in 2013.

That is one of several so-called triggers that would also slash domestic discretionary spending and cut hundreds of millions of dollars from the defense and domestic security budgets if Congress fails to pass a deficit reduction plan.

The Pentagon is potentially facing cuts of $850 billion, including $500 billion if the trigger is tripped. Pro-defense lawmakers in both parties and the White House are signaling that they will resist such deep cuts.

“There is no scenario in the second phase of this proposal that does not turn a debt crisis into a national security crisis,” said House Armed Services Committee Chairman Howard P. “Buck” McKeon (R-Santa Clarita).

But Gordon Adams, who oversaw the defense budget in the Clinton administration, said pressure to reduce the deficit would force cuts of $1 trillion or more over the next decade, especially with the U.S. drawdown in Iraq and waning public support for the Afghan war.

“By 2021, it will still be a very capable military, but we will look back and see that $1 trillion has come out of the Defense Department,” Adams predicted.

The Obama administration and its Democratic allies have billed the Medicare trigger as a relatively benign way to control federal healthcare spending by forcing the healthcare industry to come up with the savings.

In the past, that approach has usually shielded seniors from big jumps in co-pays and deductibles. It was used most recently in the healthcare law enacted last year.

And despite cries from hospitals, doctors and other medical providers and warnings that they would stop accepting Medicare, most have adapted to the changes and continue to serve Medicare patients.

Many likely will again, according to healthcare experts. But the landscape has always been more challenging for hospitals and primary care doctors that serve large numbers of Medicare and Medicaid patients.

Without as many privately insured patients who typically pay more than Medicare, these providers are more sensitive to Medicare cutbacks.

And their disappearance would likely deprive seniors and other Medicare beneficiaries of vital medical services.

“If there is a 2% reduction, it will put unbelievable stress on our business,” said Michael Rembis, chief executive of Hollywood Presbyterian Medical Center in Los Angeles, a so-called safety net hospital that serves primarily Medicare and Medicaid patients.

“Something has to break,” he said, noting that costs for labor, supplies and drugs continue to go up. “If I can’t make revenues to pay for cost increases … how does a hospital continue to provide quality care?”

In Sioux Falls, S.D., the Evangelical Lutheran Good Samaritan Society, a leading national nonprofit nursing home provider, has already begun to look at whether service cutbacks will be necessary.

(Last week, the Obama administration moved to reduce payments by 11% for skilled nursing facilities amid evidence of overpayments, particularly to for-profit providers.)

And across the nation, many primary care doctors are watching nervously after a year in which Congress almost allowed double-digit cuts in Medicare payments to go into effect. Those cuts are next up for review at the end of 2012.

“It pulls at people’s sense of what’s right,” said Dr. Glen Stream, incoming president of the American Academy of Family Physicians.

“Those primary care doctors who are seeing a disproportionate share of Medicare patients are going above and beyond, providing a service to the community,” he said. “But they are the ones most impacted. We’re potentially punishing those who should be rewarded.”