Healthcare Takes It On The Chin With Sequestration

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Healthcare Economics

EDITOR’S NOTE: When President Barack Obama signs the order today to implement a series of automatic budget cuts known as sequestration, no part of the budget other than defense will take a bigger hit than healthcare providers and research, and public health services.

The implementation of $85 billion in cuts to federal spending starting this year includes a 2 percent reduction in Medicare payments to hospitals, doctors and insurers, beginning in April.

According to an analysis by iVantage Health Analytics, a Maine health care research firm, more than 4,200 hospitals, that are among the largest employers in many communities, would lose nearly $3 billion under the Medicare cuts this year, resulting in significant job losses, service reductions and other belt-tightening measures.  The researchers also predict that sequestration cuts added to scheduled cuts in Medicare reimbursement imbedded in the Patient Protection and Affordable Care Act would tip the operating margins of nearly 100 hospitals from positive to negative.

The HealthDay.com article excerpted below provides an excellent overview of the impact of sequestration on healthcare providers and research. It also raises the over-arching question about the dysfunctional state of our executive and legislative bodies and their inability or unwillingness to effectively address and collectively find solutions to our fiscal problems. 

NEWSDAY.COM–“Sequestration” is Washington-speak for the approximately $85 billion in annual federal spending cuts mandated by the Budget Control Act of 2011. Those cuts were originally set to take effect on Jan. 1, but were delayed in the deal to avert the so-called “fiscal cliff” of tax increases and budget reductions.

When President Barack Obama signs the order today to implement a series of automatic budget cuts known as sequestration, no part of the budget other than defense will take a bigger hit than healthcare providers and research, and public health services.

But those cuts are set to kick in Friday, with spending reductions coming to a wide range of areas and programs, including health care, defense, education, air travel and agriculture.

Portions of health care and related programs would be somewhat unscathed — for instance Medicaid, the government-run insurance program for poorer Americans, would be left untouched.

But experts point to three key areas that health-care consumers should be concerned about, not just in the days ahead but as Congressional Republicans and President Barack Obama continue to wrangle over the budget for the next fiscal year starting in October:

  • Hospitals: Decreases in Medicare reimbursement for hospitals and skilled nursing facilities are set to total nearly $4.5 billion, or about $1.3 million for the average facility. Such cuts are expected to result in layoffs, especially of nurses, who represent the largest percentage of employees in hospitals.
  • Physicians: Medicare payments to doctors could drop by as much as 3 percent to 4 percent, according to some estimates, totaling about $4.1 billion. The reduction in revenue could be the last straw for frustrated physicians who may stop accepting Medicare patients — who tend to be 65 or older — or decide to retire a little sooner than they had planned.
  • Research: Federal agencies such as the U.S. National Institutes of Health (NIH), the National Science Foundation, the U.S. Food and Drug Administration (FDA) and the U.S. Centers for Disease Control and Prevention (CDC) are each facing funding cuts of about 5 percent, or about $2.5 billion in all. The reductions could slow FDA reviews of proposed new drugs and medical devices, for example, and curtail some services at the CDC — such as infection control and immunization. The real impact on research projects, which are typically long-term efforts, is harder to estimate.

CLICK HERE to read the complete story on HealthDay.com.

 


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