Late Monday, the 12 members of the Joint Select Committee on Deficit Reduction (aka the “Super Committee”) announced their failure to agree to a debt-reduction package. How should consumer health advocates react to the news?
A Plague on Only One of Your Houses
“He said/she said” media accounts suggest that the Super Committee failed because the Republicans rejected any meaningful revenue increases and because Democrats were equally obstinate in refusing to cut entitlement programs, such as Medicare and Medicaid.
The truth is that Committee Democrats were willing (far too willing in our view) to consider ill-advised and unnecessary cuts to Medicare benefits and to Medicaid. For example, one of their final proposals involved $50 billion in Medicaid cuts, including a $13 billion reduction in the federal-matching dollars that help states fund the program. It also cut $350 billion from Medicare, including $100 billion from beneficiaries – most likely by imposing higher premiums and co-pays.
Republicans did not offer equivalent concessions on revenues. Their proposal included a largely regressive revenue increase: caps on tax expenditures, such as the tax exemption on employer-sponsored health insurance. And it squandered most of these new revenues paying for an income tax cut that would lock us into rates well below the Bush tax cut levels, largely to the benefit of the highest-income earners.
Reports suggest that a last-ditch effort at a deal failed because not one Super Committee Republican would agree to even a nominal tax hike on the wealthiest Americans. Democrats – to their credit – drew the line at asking low- and moderate-income Americans to bear the entire brunt of deficit-reduction.
A Mixed Bag for Health Care
The failure of the Super Committee to come up with a deficit-reduction package triggers across-the-board cuts, starting in 2013. These cuts are designed to achieve $1.2 trillion in savings over 10 years – half in defense spending and half in domestic spending.
Fortunately, many important health care programs are exempt from these cuts, including Medicaid, the Children’s Health Insurance Program (CHIP), and the premium tax credits that are slated to help families in the Exchange starting in 2014. Medicare benefits are also largely protected: across-the-board cuts to Medicare are limited to two percent of the programs’ costs, and can only come from cuts to providers and insurers.
But not all health care spending is protected. The sequester will increase low- and moderate-income families’ out-of-pocket health care costs starting in 2014 by cutting into the cost-sharing subsidies in the Exchange. Cuts will also impact Basic Health Program funding, threatening the viability of a program that has great potential to lower health care costs for very low-income families. And they will restrict funds for the Public Health and Prevention Fund, undermining its potential to improve the health of the American people. In addition the cuts in the sequester are expected to have a negative impact on employment, meaning fewer people with employer sponsored insurance and more people either uninsured or on Medicaid.
A silver lining?
One possible silver lining to the across-the-board Medicare cuts triggered by Super- Committee failure is that they could open the door to improvements in our payment system.
Billions of dollars every year are wasted on preventable hospital admissions and complications, such as hospital-acquired infections. The Affordable Care Act begins to tackle this problem by reducing payments to hospitals with high rates of preventable readmissions and complications, but much more remains to be done.
Rather than relying on across-the-board rate cuts to achieve the necessary savings in Medicare, policymakers could target cuts at providers with higher levels of this type of preventable health care spending. This would translate to better care for patients as well as lower cost for the system, and gives providers a chance to reduce costs by improving quality instead of just having to absorb another rate cut. Better care at lower cost is also a better alternative than the benefit cuts that were considered by the Super Committee and would put Congress on the side of the American people, who want to see Medicare and Medicaid protected, not gutted.
As Yogi Berra would say, “it Ain’t over ‘til it’s over” (and it Ain’t over)
Although the Super Committee has closed its case, advocates cannot rest easy. Congress is headed straight into another spending battle that puts health care funding at risk yet again.
Health care industry analysts had hoped the Super Committee’s deal would fix the Sustainable Growth Rate (SGR), a broken formula that automatically reduces Medicare physician payment rates every year. The failure of the Super Committee to reach a deal means Congress has only five weeks to override the scheduled 27 percent Medicare physician payment cut required by the SGR formula, and they are likely to look to savings in health care programs to foot the bill.
To pay for last year’s SGR fix, Congress weakened the ACA’s affordability protections for low- and moderate-income families. It’s entirely possible that bad ideas bandied about by the Super Committee will be back on the table as potential pay-fors for this year’s SGR fix. So advocates need to take a deep breath, and get ready to fight once more to protect these vital programs.
-Katherine Howitt, Senior Policy Analyst
and Michael Miller, Strategic Policy Director