Failure of Super Committee Blows Doc-Fix Opportunity

Disclosures

November 21, 2011

November 21, 2011 — Super committee. Super expectations. Super dud.

Back in August, when it sealed a debt-ceiling deal, Congress created the Select Committee on Deficit Reduction and charged it with devising a plan to reduce the federal deficit by at least $1.2 trillion. This afternoon, the so-called super committee announced that it would not meet its Wednesday deadline for presenting such a plan to Congress, with its Republican and Democratic members blaming each other for gridlocked negotiations.

"After months of hard work and intense deliberations, we have come to the conclusion today that it will not be possible to make any bipartisan agreement available to the public before the committee's deadline," Rep. Jeb Hensarling (R-TX) and Sen. Patty Murray (D-WA), the committee's co-chairs, said in a press release.

The missed deadline will automatically trigger $1.2 trillion in across-the-board budget cuts beginning in 2013 through a process called sequestration. The actual cuts will be somewhat less because shrinking the federal budget by roughly $1 trillion will save $200 billion or so in interest payments, adding up to the required amount.

The specter of sequestration was designed to spur the super committee to meet its deadline, but its members could not hammer out a compromise on combining increased revenue with decreased spending to shrink the deficit. Without a serious tax hike, Democrats would not agree to deep cuts in entitlement programs. Republicans, however, stuck to their promise not to raise taxes.

Missed Opportunity to Repeal the SGR Formula

The collapse of the super committee directly affects physicians in 2 ways. For one, sequestration will translate into a 2% Medicare pay cut for physicians, hospitals, and other providers in 2013. However, it is not clear whether providers will feel this financial pain equally, said Shawn Martin, director of government affairs for the American Osteopathic Association.

"Can the Secretary of the Department of Health and Human Services apply the cuts any way he wants?" said Martin. "Maybe some providers won't get cut."

In addition, Congress conceivably could undo the Medicare pay cut between now and 2013, just as some GOP lawmakers are already proposing legislation to spare the Department of Defense from sequestration and the loss of hundreds of billions of dollars.

The other impact of the super committee's belly flop on physicians is the loss of a golden opportunity to repeal Medicare's sustainable growth rate (SGR) formula for physician reimbursement. That formula will subject physicians to a 27.4% pay cut on January 1.

Organized medicine had lobbied the super committee to recommend repealing the SGR formula, which would cost some $300 billion if Congress merely froze Medicare rates for 10 years. Martin said the super committee had more leeway than lawmakers normally enjoy to juggle the federal budget to find $300 billion to offset this cost. In addition, any proposal emanating from the super committee could not be amended or filibustered, provided that it met its November 23 deadline.

Congress can still act to repeal or postpone the 27.4% Medicare pay cut before year's end, but it would be a replay of other last-minute rescues from the SGR formula since 2003 that have tried the patience of physicians. Medical societies have warned that such a massive reduction would force many physicians to stop treating not only Medicare patients, but also military families whose TRICARE coverage is based on Medicare rates.

"The Annual Charade"

Organized medicine quickly issued press releases in response to the super committee throwing in the white towel today. Their tone was scathing and dire.

"Once again, Congress failed to stop the annual charade of scheduled Medicare physician payment cuts and short-term patches, which spends more taxpayer money to perpetuate a policy everyone agrees is fatally flawed," said Peter Carmel, MD, president of the American Medical Association. "A decade of uncertainty and repeated threats of steep cuts jeopardizes access to care for seniors and military families who rely on the Medicare and TRICARE programs."

Virginia Hood, MBBS, MPH, president of the American College of Physicians, added that if Medicare whacks its fees by more than one fourth on January 1, physicians face a wide range of painful options — closing their practices, turning away Medicare patients, laying off staff, and postponing the purchase of electronic health records.

Dr. Hood also warned that sequestration cuts in other parts of the federal healthcare budget would "endanger everything from military health care to medical research to prevention and control of disease to training of primary care physicians and other specialties facing shortages."

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