Mandated health care cuts don't equal health care reform

Under the new budget control agreement that President Obama and Congress reached in August to allow for an increase in the debt ceiling, federal health care spending could be subject to deep cuts. And the new rules of the game will make it very hard to get Congress to turn down or modify proposed cuts.

The Budget Control Act of 2010 already caps total spending on discretionary programs that go through the annual appropriations process, and the president is required to withhold funds from federal agencies if Congress does not keep spending below the authorized levels.

Although the new law spared Medicare and Medicaid from immediate cuts, a super-committee made up of 12 members of Congress is charged with finding more than a trillion dollars in additional deficit reduction by Nov. 23. Medicare and Medicaid, as two of the biggest contributors to federal spending growth, will almost certainly be considered for savings.

Assuming that the super-committee can reach a bipartisan agreement, the law makes it impossible for Congress to modify this agreement. Congress will have until Dec. 23 to approve the super-committee's recommendations without amendments. If the super-committee deadlocks or Congress turns its recommendations down, then the law mandates automatic spending cuts, split 50/50 between national defense and non-defense spending programs, exempting certain programs to help low-income persons, including Medicaid. If this happened, Medicare payments to clinicians would automatically be cut by 2%, effective January 2013. The prospect of across-the-board cuts will act as a powerful motivation for the super-committee to reach a deal and for Congress to pass it.

For ACP, this means that many programs supported by the College may be vulnerable, such as grants to medical schools to support primary care education, faculty and curricula development, and student scholarships. On the mandatory spending side, Medicare Graduate Medical Education (GME) payments to teaching hospitals could be cut by tens of billions over the next decade. Payments for high-cost imaging services might also be trimmed. Medicare payments to drug and medical device manufacturers and hospitals could also be reduced. The super-committee could also change Medicare by delaying eligibility and requiring higher-income beneficiaries to pay more.

Any cuts that come out of this process will be on top of the $400 billion in Medicare cuts in payments to hospitals, drug and medical device manufacturers and Medicare Advantage plans already required to fund the Affordable Care Act. And physicians already face a 29% cut in Medicare payments on Jan. 1, 2012, unless the super-committee eliminates the Medicare's Sustainable Growth Rate formula in its deficit-reduction recommendations.

The process, timetable, and automatic enforcement mechanisms created by the Budget Control Act will make it very difficult for external stakeholders, including ACP, to influence the outcome. There simply will be fewer opportunities in the legislative process to lobby for the College's priorities, and fewer members of Congress who will have a say, especially if and when the super-committee issues its report. Nevertheless, ACP will use every opportunity available to urge that critical programs to provide all Americans with affordable health insurance coverage, to train enough internists, and to reform and improve payments to internists get adequate funding.

The problem with the Budget Control Act is not that it mandates reductions in federal health care spending. There is little disagreement among analysts that projected spending on Medicare and Medicaid is not sustainable over the long term. Without changes, the federal government will spend so much on these two programs alone that that there will be very few federal dollars available for other needs, and keeping them going would require significantly higher taxes, premiums, cuts in clinician payments, and/or increased deficit spending. Rather, the problem is that the Budget Control Act provides for little public and physician input into decisions that could have far-reaching consequences for patient care.

Take Medicare GME, for example. The Budget Control Act makes it more likely that the super-committee will simply impose cuts that will damage the quality of physician training programs and deny necessary funding for programs to train more internal medicine specialists. But with more time and more physician input, GME could be reformed, not just cut. Congress could require that all payers (not just Medicare) contribute to graduate medical education, that payments be aligned and weighted to support policy goals to ensure an adequate supply, specialty mix and site of training, and that innovative training models be pilot-tested.

Finally, a reduction in federal health care spending could best be achieved if Congress would work with the medical profession to address the reasons why costs are going up. The medical system spends an estimated $700 billion each year on marginal or ineffective care. A concerted effort to improve outcomes and reduce costs can't be completed in the few months required by the Budget Control Act. Instead, the act may make it more likely that Congress will get its savings mostly from cuts in payments to clinicians, instead of producing real reform to make health care more effective and efficient.