Health-Care Cuts

One outcome of last month’s debt-ceiling agreement[1] — in which Republicans in Congress forced spending cuts in a variety of programs as a condition for raising the borrowing limit of the US government — was the creation of a committee charged with recommending further spending cuts. Sometimes referred to as a “supercommittee,” this 12-member panel, evenly divided between Democrats and Republicans as well as House and Senate members, must come up with a plan that reduces the federal budget deficit by at least $1.2 trillion over 10 years. If they fail to reach an agreement, or if Congress does not pass their agreement, automatic spending cuts will kick in — affecting areas like Medicare and defense spending in ways that both parties would like to avoid.

So where will the deficit-reduction panel find savings? It appears unlikely that Republicans on the panel will agree to significant revenue increases (through higher taxes or fewer tax breaks), if any at all, in which case most or all of the savings will have to come from spending cuts. And since health-care spending represents such a large share of the federal budget — Medicare and Medicaid combined cost almost $1 trillion annually, out of about $3.7 trillion in total spending — it is an area in which large cuts are considered likely.

To that end, there are may possibilities regarding what will be cut, and by how much. A recent article[2] from Reuters outlines what federal health expenditures might be on the line. First, the article notes that if no agreement is reached, Medicare will automatically be cut by $120 billion over 10 years — just over 2% of the program’s total budget. These cuts would most likely reduce reimbursement rates for health-care providers rather than directly affect Medicare beneficiaries, although if enough doctors were to stop participating in Medicare as a result, patients might feel an impact.

But assuming that the deficit-reduction panel does reach an agreement, it may take any of a number of actions regarding Medicare: means-testing to increase premiums for higher-income beneficiaries, increasing the eligibility age for healthy people, authorizing the program’s governing agency to take a tougher stance against covering procedures with questionable medical benefits, or authorizing negotiations with pharmaceutical companies that could lower the cost of prescription drugs for the government.

Regarding Medicaid — the joint federal-state program for low-income families — the panel could cap spending per enrollee based on the overall growth rate of the US economy, cap payments for durable medical equipment, authorize the governing agency to scrutinize providers that prescribe high levels of prescription drugs, or authorize a crackdown on states that levy taxes on health-care providers to help pay for Medicaid (since the federal government matches state spending on Medicaid, critics argue that such taxes artificially inflate state spending to get more federal money). Any cuts by the panel to the 2010 Affordable Care Act[3] are expected to be minor.

What do you think — which of these potential cuts make the most sense, and which would you rather not see happen? Are there any other ways you’d like to see the federal government save money on health care, or any other sources of savings or revenue you’d like the government to rely on instead? Are you worried that the deficit-reduction panel’s actions could have a negative impact on your health care? Leave a comment below!

  1. debt-ceiling agreement:
  2. recent article:
  3. 2010 Affordable Care Act:

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