The co-chairs of the Joint Select Committee on Deficit Reduction have announced that the committee has failed to come to an agreement on a deficit reduction strategy.  The bi-partisan, bicameral committee, formed by the Budget Control Act, was charged with reducing the national deficit by at least $1.2 trillion.

The committee’s failure to reach an agreement means automatic spending cuts totaling $1.2 trillion, to be split between defense spending and non-defense programs, will become effective in January 2013.  Under this across-the-board cut, hospitals face a 2 percent reduction to Medicare payments over nine years (2013 to 2021).  Medicaid cuts are, however, exempt from the cuts.

Congress will now take the time to determine the next steps for deficit reduction.  Some are calling for the cuts to be repealed or delayed further, though the president has already threatened to veto any attempts to do so as a means to encourage continued Congressional action on deficit reduction.

IHA strongly opposes the cuts to hospitals as not only are they incredibly arbitrary, but hospitals have already committed to more than $155 billion in Medicare cuts to help finance the health care reform law.  By simply piling on more and more cuts, hospitals are finding themselves unable to expand critical services and are unable to create jobs with so much financial uncertainty, adding additional pressure to the economy.  IHA will continue to work with Iowa’s Congressional Delegation on this issue.

The committee is nearly assembled with 9 of the 12 members having been announced.  From the Senate leaders selected Democrats Patty Murray (WA), Max Baucus (MT), John Kerry (MA) and Republicans Jon Kyl (AZ), Pat Toomey (PA) and Rob Portman (OH).  In the House: Republicans Jeb Hensarling (TX), Dave Camp (MI) and Fred Upton (MI) were nominated to serve.  House Democrats have not yet been selected, and must do so by August 16.

Once finalized, the committee will begin its work looking for spending reductions.  The commission must agree upon an adequate level of savings by November 23 when it will then seek support of the full Congress.  Congress must vote to approve the cuts by December 23 in order for the debt ceiling to be raised again.  However, should the committee fail to agree on cuts or successfully sell their proposal to Congress, then an automatic across-the-board cut will go into effect.  This would trigger an automatic $1.2 trillion cut to the federal budget.  Medicare cuts would be capped at 2 percent and Medicaid would be exempted from the cuts.

IHA continues to monitor the ongoing work in Washington, D.C. hospital advocates should stay tuned to the IHA Policy Blog for continuing coverage as more details unfold.

This week the so-called “Gang of Six” released a new proposal that is gaining traction.  Members include Senators Saxby Chambliss (R-GA), Tom Coburn (R-OK), Kent Conrad (D-ND), Mike Crapo (R-ID), Dick Durbin (D-IL) and Mark Warner (D-VA).

Their plan to seeks to reduce national deficit by nearly $4 trillion over 10 years and proposes billions in cuts from Medicare and Medicaid.  A few of members of the Gang of Six have yet to formally sign off on the framework but President Obama, after reviewing the proposal, added his support saying that proposal is on the right track concerning this issue.

The proposal seeks a two-part process with $500 billion in initial cuts followed by a process for congressional committees to pass a larger deficit reduction measure within 6 months.  Committees would be responsible for finding additional discretionary cuts and $800 – $900 billion in entitlement savings, as well as $1.1 trillion in new revenues.

The plan is unlikely to emerge in the short-term discussion of how to address the debt ceiling by August 2, though it could set up a series of short-term extensions giving Congress time to work on a larger measure.

The proposal comes on the heels of a party-line vote in the House this week on the bill referred to as the “cut, cap, and balance” legislation.  The 234-190 vote was backed by the freshmen “tea-party” caucus, even though it’s been widely reported that the legislation is dead on arrival in the Senate and faces a White House veto.

IHA has issued a series of Action Alerts urging Congress to protect hospital payments under Medicare and Medicaid as negotiations continue:

Prospective Payment System Hospitals – Take Action Here
Critical Access Hospitals – Take Action Here
Rural Prospective Payment or “Tweener” Hospitals – Take Action Here

As the nation inches closer to the August 2nd deadline, when the debt limit is to be reached, pressure is mounting for Congress and the White House to reach a deal.   Though no specifics have yet been released, there continues to be wide speculation that health care spending will be targeted for cuts — although many lawmakers are finding the discussion a hard pill to swallow considering the backlash that ensued after House Budget Committee Chair Paul Ryan (R-WI) released a proposal that sought to make sweeping changes to the Medicare program.

Despite the lack of political will among lawmakers, Biden has publicly stated that he is interested in achieving consensus with lawmakers on cutting $1 trillion from the budget.  To do so, the vice president said that revenue generating options, like tax increases, and spending reduction options, like making cuts to entitlement programs, must all be on the table.

Reports indicate that the group is working on a two-pronged approach to deficit reduction.  First, to make immediate cuts to federal spending and secondly, to put in place so-called “triggers” that would force programs to be cut should they grow at a certain rate.

For example, if Medicare spending from one year to the next were to outpace inflation during that same time, the statutory trigger would be pulled forcing Medicare spending to be cut by an amount that would align it with the inflation rate.

This remains a very controversial approach, as there are so many factors that come into play when dealing with these major programs, that a one-size-fits-all, or across-the-board cut approach is not likely to be the best solution in the short or long-term.

IHA remains engaged with the ongoing budget debate in Washington D.C. and is concerned about the direction the conversation is heading with regard to Medicare and Medicaid.

Hospitals in Iowa and across the nation are already enduring significant Medicare cuts as a result of mandates contained in the health care reform legislation, and further cuts could certainly put access to health care nationwide at risk.

Though the proposal is merely a framework, early analysis shows that of the $4 trillion in sought reductions, at least one quarter of the savings the president is requesting comes from reductions in government health care spending, in particular the Medicare and Medicaid programs.  These programs have come to the forefront of discussions when dealing with the national debt, which is currently more than $14 trillion.

The president’s plan seeks to achieve Medicare and Medicaid savings of $480 billion by 2023 and an additional $1 trillion over the following decade (2023-2033).

The plan would:

• Strengthen the power of the controversial Independent Payment Advisory Board
• Reform the Medicaid program’s Federal-State Partnership
• Make changes to Medicare’s prescription drug program
• Reduce costs by improving patient safety
• Reduce abuse in the Medicare and Medicaid programs

The White House has released more detail here.

The proposal comes in response to the House Republican proposal that would make more fundamental changes to the Medicare program — while the president’s proposal aims to make changes to the program as it exists today.  House Budget Committee Chair Paul Ryan (R-WI) stands by his committee’s proposal and came out yesterday critical of the Obama plan.

On the Ryan plan, the president said, “I will not allow Medicare to become a voucher program that leaves seniors at the mercy of the insurance industry with a shrinking benefit to pay for rising costs.”

It is unclear at this time which, if any, of the presidents’ or the House Republican proposal will gain enough traction to move forward, but even on first look of the side-by-side comparision of the proposals one can easily see stark differences that will add to the overall difficulty of compromise on these tough issues.

IHA will continue to evaluate the proposals and monitor their progress.

Every year, the Budget Committee puts together a budget resolution, which is largely a blueprint – but sets the tone for the 13 annual appropriations bills Congress is expected to pass.

Of key concern at this juncture is the federal deficit.  Over the past decade the deficit has gone from a $300 billion surplus to now nearing $15 trillion in debt.

According to a committee spokesperson, “Chairman Ryan has committed to put forward a budget that deals with the drivers of the debt.  He has committed to put forward a budget that helps spur job creation and economic growth. He has committed to put forward a budget that helps save the nation’s critical health and retirement security programs.”

What is expected, however, is a proposal that would alter the way in which federal dollars are spent on Medicaid, a state-federal partnership.  Ryan’s budget is likely to propose the federal share of Medicaid be converted into a block grant structure.  This would save money for the federal government by providing set amounts to states each year (adjusted for inflation annually), rather than today’s model which allows for more uncertainty of the costs.  In other words, if a state sees a major increase in its Medicaid volume, the federal share grows along with it with and has no mandated cap.

Under a block grant proposal, regardless of increased patient volume or other factors, states would receive a pre-determined federal share and would be required to manage the population using only those dollars.  Specifics on this option are still being panned out, though the Congressional Budget Office has reported that this provision could save up to $280 billion over 10 years. The proposal in total is still in draft stage and is expected to be unveiled next week.

However, the House Energy and Commerce Committee recently announced a bi-partisan effort to solicit ideas, feedback and proposals from national physician and hospital groups in an effort to permanently fix this flawed provision.  The key word is “permanently” as over the past decade, Congress has elected to only temporarily patch the problem passing a variety short-term fixes to prevent 15, 20, or even 30+ percent cuts to physician Medicare payments.  But like many efforts seeking to do the same – preventative procrastination hasn’t done much to solve the long-term, hugely expensive problem.

Problematically there is little agreement on a solution and the proposals vary greatly, and with so much emphasis on the federal deficit and budget debate in Washington D.C. its unclear what will come next on this issue.  However, the budget debate could present Congress with an opportunity for a fix, as it has become clear that in order to fix the nation’s budget – everything must be on the table.

The letter to stakeholders requests feedback by early April and the committee could hold as early as May. Key recipients include: The American Medical Association, American Academy of Family Physicians, American Hospital Association, Federation of American Hospitals, Medical Group Management Association and many others.

Senator Max Baucus and Charles Grassley Credit: The Washington Times

Late last month, with little time to spare, the U.S. Senate passed a 31-day patch that would prevent the scheduled 24 percent cut to physician payments.  The Physician Payment and Therapy Relief Act of 2010 was introduced by Senate Finance Committee Chairman Max Baucus (D-MT) and Raking Member Chuck Grassley (R-IA) as part of an effort to provide both a short-term and longer-term solution to pay for the Medicare Physician Payment Formula.

However, physicians still face these cuts as this temporary patch expires on December 31.  This week it was announced that Senate leaders may be close to reaching an agreement on a one-year fix.  Sources close to the negotiations say the deal would pay for the patch by making changes to the tax subsidy program under the health care reform law.  Majority Leader Harry Reid (D-NV), Minority Leader Mitch McConnell (R-KY), and Sens. Baucus and Grassley agreed to the deal, according to Congressional aides and lobbyists familiar with the proposal.

The one year extension would cost $19.2 billion and is financed by reconfiguring the method by which the government would recoup overpayments to individuals who receive tax credits to obtain health insurance through the “exchanges”.

Under health care reform, individuals at certain incomes are eligible receive federal tax credits to help them buy insurance. If a person misstates his/her income or if it changes, the law mandates repayment. The “doc fix” agreement raises the repayment obligation.

IHA supports a long-term solution to the physician payment cuts and continues to urge Congressional action on this issue.



IHA has been meeting in-person with each of the offices of Iowa’s congressional delegation and has drafted a delegation letter to CMS urging immediate action on this issue.  To date, Senator Tom Harkin, and Representatives Leonard Boswell, Steve King, Tom Latham, and Dave Loebsack have all confirmed their support on the issue and have agreed to sign onto the letter.  Staff from the offices of Senators Chuck Grassley and Harkin have also been in contact directly with CMS to outline their concerns and staff for Senate Finance Committee Chair Max Baucus have been in communication with CMS on this issue as well.

Earlier this week, CMS hosted a rural health open door forum conference call and spent most of the time discussing physician supervision.  CMS acknowledged the arising complications and encouraged hospitals to continue reaching out to help CMS understand the “real-world” impact of its policy.

CMS verbally qualified its position by stating that physicians or other allied professionals, recognized in the outpatient rule should be “fairly immediately available” and recognized that the rule doesn’t anticipate clinicians “hanging around the emergency department” with no knowledge of anticipated patient arrivals.  CMS stated that determination of “immediately available” is essentially at the discretion of the hospital.  CMS also acknowledged that this billing policy predominantly creates an issue with observation status, which is currently billed as a therapeutic service.  However, CMS stopped short of backing away from the rule as written, but confirmed that further written guidance will be provided on this topic.

IHA will continue working with Iowa’s Congressional Delegation, the Senate Finance Committee staff as well as the American Hospital Association to seek clarification and resolution of this issue.  Pending further guidance from CMS, IHA will survey Critical Access Hospital members to further refine its understanding of the scope of the problem and potential solutions.

The central point of the editorial is that neither of these cost-saving approaches has been as widely adopted as one might expect.  Why?  Because the insurance companies – both public and private – have provided few, if any, incentives to adopt them. 

This is yet another illustration of how health care spending is being driven by something other than value.  Instead, it is driven by a system that rewards quantity – a physician who does more testing and procedures will be paid, even if those tests were not the best or possibly even unnecessary. 

The Globe emphasizes evidence-based best practices and notes that “Medicare should have the authority to weigh both comparative effectiveness and cost in steering doctors to the best practices.”  In other words, Effectiveness + Cost = Value. 

In Iowa, we are fortunate to have a health care system that, particularly in the community hospital setting, is dominated by a culture of patient-centered primary care.  This means care tends to be provided in a coordinated fashion with the primary care physician at its foundation.  Patient-centered primary care works when best practices are emphasized.  And when that happens, real value in health care is the result.  

This is why Medicare would save billions of dollars every year if it demanded, as the Globe editorial suggests, the same value from others that Iowa already provides.