Cuts to Medicare providers will affect Medicare beneficiaries

Medicare providers are among the clear losers in the debt ceiling deal. Come November, they face two really unpleasant options: absorbing whatever cuts the congressional super committee settles on, or, if the group doesn’t reach an agreement, absorbing an across-the-board budget reduction. But the White House insists Medicare beneficiaries will be unharmed. As the administration’s Fact Sheet promoting the deal puts it, “any cuts to Medicare would be capped and limited to the provider side.”

Technically, they’re correct: the trigger cuts do not hit Medicare beneficiaries. They hit providers. But those provider cuts don’t exist in a bubble, and health experts wouldn’t be surprised to see a crunched budget squeeze Medicare patients. “It’s not a huge leap to think that if these cuts are done with an ax and not a scalpel, it could impact beneficiaries,” says Tricia Neuman, director of the Kaiser Family Foundation’s Medicare Policy Project.

Medicaid already faces this problem. Budget reductions have lead to low reimbursements rates. That has made participating in the program undesirable to some doctors, some of whom now shy away from accepting the program. Seventeen percent of physicians do not participate in the Medicaid or CHIP programs, according to a June 2011 GAO study. That same report found a particular challenge with access to specialists: 84 percent of primary care doctors said they faced difficulties referring Medicaid or CHIP children to speciality providers.

Medicare doctors, however, have gotten really good at fending off rate cuts. Year after year, Congress has passed “doc-fix” legislation that keeps their reimbursement stable. But with the new debt bill thrown in the mix, Medicare providers are staring down a multi-billion dollar threat in the face of a whole host of other factors that have already squeezed their budgets.

Physicians find themselves fighting a two front war, prepping for the super committee process — or trigger cuts — while also gearing up for another doc-fix fight right around the same time. The most recent Medicare doctor pay patch runs out at the end of the year, and, without congressional action, rates would drop 29.5 percent.

Hospitals, meanwhile, are trying to take account of their losses at both the federal and state level. “We think we’re looking at about $45 billion over time from hospitals,” says Federation of American Hospitals President Chip Kahn of the trigger cuts. “If you put that on top of the reductions we’re already seeing from state Medicaid programs, that could have actually have a real negative synergy.”

Places to make Medicare cuts, which don’t affect rates, are increasingly hard to come by. The Affordable Care Act nabbed a lot of the “low hanging fruits” says health policy analyst Robert Laszewski. “There’s no easy money left to grab.” The reform law used reduced payments to Medicare Advantage as a big chunk of financing for expanding health insurance coverage

With all those competing pressures, its uncertain whether Medicare rates will stay stable — and what that will mean for the beneficiaries in the program. “This is going to hit the provider community really hard,” says Laszewski. “If you think the last two weeks were hard to live with, just wait until the two weeks leading up until November 23.”

Medicare providers have repeatedly threatened to pull out of the program if they saw big rate cuts. According to a recent AMA study, 17 percent of doctors already say they restrict the number of Medicare patients largely because of the low reimbursement rates. The same study found that a big pay cut could see many pulling out of the program all together.

It’s not just Medicare beneficiaries who could feel the pinch of the program’s reduced budget: Cuts to the entitlement program have traditionally correlated with cost-shifting to the private sector. Health policy analysts have long recognized that cuts to Medicare tend to correlate with cost-shifting to private insurers, sometimes dollar-for-dollar, as Harvard’s David Cutler found in the 1980s.

“Providers will have to try to shift costs to other payers,” Laszewski says. “That’s going to mean higher costs for insurance companies and therefore employers. It puts incredible pressure on the whole system. Every time we’ve seen a big government cut in health care costs, we’ve seen trend take off dramatically.”


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