2 Percent Medicare Cut Nothing To Sneeze At

Medicare might fare better than other health care programs if the congressional super committee fails to agree on a deficit-reduction package and automatic cuts kick in, but even 2 percent is a big problem when it comes on top of other recent hits, warn Rick Pollack, executive vice president of the American Hospital Association, and Karen Ignagni, president of America’s Health Insurance Plans.

Photo by Horst Frank

“Enough is enough,” Pollack said. “We feel we’ve stepped up to the plate and made a substantial contribution in the name of shared sacrifice,” which he said was $155 billion over 10 years as part of the health law. Under automatic cuts, he calculated, hospitals would lose another $43 billion over 10 years in Medicare payments alone, which he says translates into about 200,000 jobs.

That’s why some health care industry lobbyists are pushing hard for a negotiated deal.

Ignagni also cautioned that the Medicare Advantage program, through which about a quarter of seniors get mostly private managed care health plans, already took $200 billion in hits from the health law. Former CBO Director Douglas Holtz-Eakin found, she said, that beginning in 2014, insurance premium taxes could add as much as 3 percent a year ($475) to an average family premium.

“If what you ask is whether 2 percent on top of that is the right strategy, I don’t think I have to think long to answer that question. No entity has faced a cut like that. Now there is research coming out that those [health] plans are doing a better job [avoiding hospital] readmissions and aligning incentives to detect infection rates” than traditional fee-for-service insurance plans, said Ignagni.

Still, 2 percent is far less than what non-defense discretionary programs would face under automatic cuts: a 7.8 percent reduction compared to baseline projections in 2013 and 5.5 percent a year by 2021, according to the Congressional Budget Office. To be sure, limiting the blow to Medicare would make cuts to other programs more severe. The 2 percent reduction would apply to hospitals and other health care providers, but could not touch benefits for seniors and the disabled.