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Sequester: Medical researchers should panic, medical providers shouldn’t

Welcome to Health Reform Watch, Sarah Kliff’s regular look at how the Affordable Care Act is changing the American health-care system — and being changed by it. You can reach Sarah with questions, comments and suggestions here. Check back every Monday, Wednesday and Friday afternoons for the latest edition — and read all previous columns here.

It is not hard to find sequester panic in Washington these days. Legislators are panicked. The president is panicked. Even the zoo animals are panicked — and if otters are panicking, we should probably panic too.

Except, there is one group that isn't very panicked at all: The health provider community. For years, they've had the finger pointed at them as the main source of our budget woes. Now, the sequestration has provided some shields from its most panic-inducing cuts.

So, how panicked should various health-care sectors be right now? It all depends on their role in the health-care industry. Without further ado, a quick guide to health-care panic over the sequester.

The most panicked: Medical researchers.

The National Institutes for Health will face the full brunt of the sequester, losing 5.3 percent of its 2013 budget and then 8.2 percent annually in years going forward. In 2013, that works out to a $1.6 billion budget cut to the agency.

"I think the suddenness of it and the depth of it would be a disaster for research, which is not an activity that you can turn on and off from year to year. It’s an activity that takes time," Former NIH director Elias Zerhouni told my colleague Dylan Matthews. "The most impacted are the young, new investigator scientists, who are coming into science, and will now abandon the field of science. There will be a generational gap created."

Patient advocacy groups are especially worried about the fallout of these cuts, what it will mean for discovering new treatments and developing breakthrough therapies. The worry that many express echoes that of Zerhouni, about scaring off a generation of medical researchers.

"These cuts will have an exponential effect on the future of research and medicine: an entire generation of scientists may be turned away from careers in research and never return," says Janis Abkowitz, president of the American Society of Hematology president, which focuses on blood disease research.

Medium-panicked: Health-care providers. 

There's no doubt that doctors and hospitals got one of the better deals in the sequester. The Medicaid program was completely shielded from the across-the-board cuts. Medicare, meanwhile, had its cuts capped at 2 percent of the program's budget.

Still, there is some worry about how other programs cuts could effect their ability to deliver care. Community health centers, for example, did not get an exemption from the cuts. They expect to lose as much as $120 million in this budget year.

“People could lose access to basic health-care services, and many of them cannot afford to go anyplace else," says Gary Wiltz, board chair-elect of the National Association of Community Health Centers. "Every community that a health center serves will be adversely affected in some way."

For health-care providers, the sequester is a bit of a mixed bag, with some reasons to be thankful — and others to be fearful of.

Medium-panicked: The Center for Consumer Information and Insurance Oversight.

As Politico's Brett Norman noticed though, there aren't exactly alarm bells sounding about this. Getting health reform right is a huge priority for the White House, and advocates roundly expect that, somehow, someway, they will make it work.

Here's how Joel Ario, who previously oversaw exchanges for the administration, put it to me in an e-mail: "I would expect Administration to use whatever flexibility it has to ensure effective implementation of the Exchanges and Medicaid expansion as the centerpieces of the ACA."

Very little panic: State Medicaid programs.

Medicaid programs are accustomed to finding themselves on the chopping block, as they take up a growing chunk of state and federal budgets. But not this time: The sequester specifically exempted the the entitlement program from cuts.

What's more, the Obama administration has recently gone out of its way to emphasis how much it doesn't want to cut Medicaid, as it attempts to woo governors to expand the entitlement program. "We are not willing to accept even the Medicaid savings that we had once put on the table," White House chief of staff Gene Sperling told a conference of health advocates in January.

KLIFF NOTES: Top health policy reads from around the Web.

Health insurers selling on the exchanges may get a discount from hospitals. "How much will hospitals reduce prices in an effort to win what are expected to be millions of newly insured patients under the Affordable Care Act? A little, not a lot, if deals disclosed this week by Tenet Healthcare are any indication. The Dallas-based hospital chain told analysts that its first contracts to treat patients buying policies in the ACA’s online marketplaces next year include total discounts of less than 10 percent compared with existing business." Jay Hancock in Kaiser Health News.

New Mexico's exchange could get snagged in a legislative hang-up. "A measure to establish a state-operated health insurance exchange stumbled in the House on Thursday after critics objected that the proposal would overly regulate medical coverage plans offered to consumers." Barry Massey in the Associated Press.

Step 1: Cat litter. Step 2: ???? Step 3: Profit! "A dozen tobacco companies have gained from a legal loophole that helped them avoid as much as $1.1 billion in U.S. taxes. Their secret: Using fillers such as the clay found in cat litter or stuffing the products with more tobacco to tip the scales in their favor. The heavier weight let the companies sidestep a 2,653 percent increase in a federal excise tax, taking advantage of a 2009 law that spared so-called big cigars." Anna Edney in Bloomberg News.