Health Care Chronicles: The Budget Control Act and its Implications for Health Care
November 18, 2011
by Diana Upton
This article originally appeared in the November 2011 issue of DOTmed Business News
This summer, the budget crisis along with the countdown to the August 2nd drop-dead passage date for a bill to increase the debt ceiling was just one big bellyache. But like so many politician- and media-created crises, we somehow dodged the bullet and relaxed knowing the Feds could continue to spend more than they take in while increasing American taxpayers’ debt burden.
Unfortunately, we’re again in panic mode, facing a crisis that is an outgrowth of the increase in the debt ceiling by a paltry $2.4 trillion, stacked on top of a prior debt ceiling of $14.3 trillion — a 16.7 percent increase.
This increase in the debt ceiling was different from those which preceded it. This one came with consequences. In the case of the Budget Control Act, we increased the debt ceiling but we added the Joint Select Committee on Deficit Reduction, dubbed the “Supercommittee.” This bipartisan, bicameral body made up of 12 members — six Republicans and six Democrats — was to be locked in a room and not allowed out until it could recommend ways to reduce the federal deficit by at least $1.2 trillion over the next 10 years. This is our punishment for complaining too much and not going along with the increase in the debt ceiling.
The Supercommittee’s recommendations are due November 23rd. Congress is to take the report and the legislative language and pass it, without amendment, providing the president final legislation to sign into law no later than December 23rd.
If the Supercommittee, Congress and the president meet the deadlines, we will have a mandate for trimming $1.2 trillion from the deficit over the next decade, on top of the $917 billion in spending reductions over 10 years, which was agreed to as part of the debt deal. Within the $917 billion in cuts, Medicare and Medicaid cannot be touched. One might assume there is no impact on health services. But, there’s a catch.
In the second round of cuts, the $1.2 trillion, the Supercommittee can make recommendations from any part of the budget. They could recommend cuts in any or all of the entitlement programs including Medicare and Medicaid. Considering the size of these entitlements and the increase in spending driven by the Patient Protection and Affordable Care Act (derisively referred to as “Obamacare”), it seems likely they will seek cuts from these budget items.
Although the Supercommittee is secretive, the National Journal published an interview with member Rep. Christopher Van Hollen (D-Md.) on October 22nd. When asked about his optimism for reaching a deal that all members could support, he said, “I’m optimistic about the intention of all members. The question is whether we’ll be able to bridge the differences. The fair answer to the question is: the jury is still out and people are working hard.”
So what happens if they miss the required date for submission of recommendations for cuts of $1.2 trillion, or even worse: they come to an agreement and Congress doesn’t pass a bill for the president to sign?
The answer isn’t pretty. Should the Supercommittee or Congress fail to meet the deadlines set by the Budget Control Act of 2011, or if the president vetoes the bill, then a failsafe mechanism is automatically triggered, resulting in $1.2 trillion in discretionary cuts. A portion of that amount, about $123 billion would apply to Medicare providers but not to Medicaid or Medicare beneficiaries. This would certainly have a chilling effect on the delivery of health care services.
Rep. Jeb Hensarling, (R-Texas) the co-chairman of the Supercommittee, views it differently. In an interview with Newsmax.TV on October 26, he said: “Entitlement programs do not have to be cut by a penny to meet that demand. Instead, ways have to be found to prevent Medicare, Medicaid and Social Security from growing.
“You cannot have programs that are growing at 5 and 6 and 7 percent a year when great economic growth might be 3 percent,” he said. “The committee’s main task is to figure a way to bend the growth curve.”
In addition to the Medicare provider cuts, there is speculation that, in order to make this work, the federal mandate for increased Medicaid services would remain, while more of the burden of paying for the services would be shifted to the states. Many states are already running huge budget deficits and may not be able to shoulder the burden.
Will the Budget Control Act of 2011 affect the health care market in the U.S.? I believe when you look at the structure of the deadlines and the triggers, there is no way that health care can avoid being negatively impacted. As Margo Channing (Bette Davis) said in the film All About Eve, “Fasten your seat belts. It's going to be a bumpy night!”
Diana Upton is president of the International Association of Equipment Remarketers and Servicers (IAMERS), a trade association comprised of members who sell and/or service pre-owned diagnostic imaging equipment.
This article originally appeared in the November 2011 issue of DOTmed Business News
This summer, the budget crisis along with the countdown to the August 2nd drop-dead passage date for a bill to increase the debt ceiling was just one big bellyache. But like so many politician- and media-created crises, we somehow dodged the bullet and relaxed knowing the Feds could continue to spend more than they take in while increasing American taxpayers’ debt burden.
Unfortunately, we’re again in panic mode, facing a crisis that is an outgrowth of the increase in the debt ceiling by a paltry $2.4 trillion, stacked on top of a prior debt ceiling of $14.3 trillion — a 16.7 percent increase.
This increase in the debt ceiling was different from those which preceded it. This one came with consequences. In the case of the Budget Control Act, we increased the debt ceiling but we added the Joint Select Committee on Deficit Reduction, dubbed the “Supercommittee.” This bipartisan, bicameral body made up of 12 members — six Republicans and six Democrats — was to be locked in a room and not allowed out until it could recommend ways to reduce the federal deficit by at least $1.2 trillion over the next 10 years. This is our punishment for complaining too much and not going along with the increase in the debt ceiling.
The Supercommittee’s recommendations are due November 23rd. Congress is to take the report and the legislative language and pass it, without amendment, providing the president final legislation to sign into law no later than December 23rd.
If the Supercommittee, Congress and the president meet the deadlines, we will have a mandate for trimming $1.2 trillion from the deficit over the next decade, on top of the $917 billion in spending reductions over 10 years, which was agreed to as part of the debt deal. Within the $917 billion in cuts, Medicare and Medicaid cannot be touched. One might assume there is no impact on health services. But, there’s a catch.
In the second round of cuts, the $1.2 trillion, the Supercommittee can make recommendations from any part of the budget. They could recommend cuts in any or all of the entitlement programs including Medicare and Medicaid. Considering the size of these entitlements and the increase in spending driven by the Patient Protection and Affordable Care Act (derisively referred to as “Obamacare”), it seems likely they will seek cuts from these budget items.
Although the Supercommittee is secretive, the National Journal published an interview with member Rep. Christopher Van Hollen (D-Md.) on October 22nd. When asked about his optimism for reaching a deal that all members could support, he said, “I’m optimistic about the intention of all members. The question is whether we’ll be able to bridge the differences. The fair answer to the question is: the jury is still out and people are working hard.”
So what happens if they miss the required date for submission of recommendations for cuts of $1.2 trillion, or even worse: they come to an agreement and Congress doesn’t pass a bill for the president to sign?
The answer isn’t pretty. Should the Supercommittee or Congress fail to meet the deadlines set by the Budget Control Act of 2011, or if the president vetoes the bill, then a failsafe mechanism is automatically triggered, resulting in $1.2 trillion in discretionary cuts. A portion of that amount, about $123 billion would apply to Medicare providers but not to Medicaid or Medicare beneficiaries. This would certainly have a chilling effect on the delivery of health care services.
Rep. Jeb Hensarling, (R-Texas) the co-chairman of the Supercommittee, views it differently. In an interview with Newsmax.TV on October 26, he said: “Entitlement programs do not have to be cut by a penny to meet that demand. Instead, ways have to be found to prevent Medicare, Medicaid and Social Security from growing.
“You cannot have programs that are growing at 5 and 6 and 7 percent a year when great economic growth might be 3 percent,” he said. “The committee’s main task is to figure a way to bend the growth curve.”
In addition to the Medicare provider cuts, there is speculation that, in order to make this work, the federal mandate for increased Medicaid services would remain, while more of the burden of paying for the services would be shifted to the states. Many states are already running huge budget deficits and may not be able to shoulder the burden.
Will the Budget Control Act of 2011 affect the health care market in the U.S.? I believe when you look at the structure of the deadlines and the triggers, there is no way that health care can avoid being negatively impacted. As Margo Channing (Bette Davis) said in the film All About Eve, “Fasten your seat belts. It's going to be a bumpy night!”
Diana Upton is president of the International Association of Equipment Remarketers and Servicers (IAMERS), a trade association comprised of members who sell and/or service pre-owned diagnostic imaging equipment.