The Fiscal Cliff “Patch”: Implications for Healthcare
With the House of Representatives’ approval on New Year’s Day of the Senate’s last-minute fiscal cliff package, Congress was able to avert the so-called fiscal cliff, avoiding cuts to the Affordable Care Act and preserving Medicare benefits, but for healthcare, the resolution in large measure amounted to yet another kicking of the can down the road.
The agreement included a one-year “doc fix,” avoiding the imposition of a 26.5 percent reduction to Medicare’s physician fee schedule for 2013, but the cost of that move—estimated at $25 billion by the Congressional Budget Office (CBO), will be borne by other healthcare providers, a “robbing Peter to pay Paul” approach. Hospitals will bear the majority of the cost via a $10.5 billion documentation and coding adjustment that seeks to recoup past overpayments by Medicare to hospitals resulting from the shift to Medicare severity diagnosis-related groups (MS-DRGs) and a $4.2 billion rebasing of Medicaid disproportionate share hospital (DSH) payments. It’s unclear whether the former adjustment is even valid, given that such adjustments have already been carefully implemented through the rulemaking process for the Hospital Inpatient Prospective Payment System (IPPS) during the past few years. Dialysis clinics and pharmacies will also bear some of the cost of this latest doc fix.
In addition, the agreement did not resolve the Budget Control Act’s sequester, which mandates a total of $109 billion in cuts to defense and non-defense programs in 2013, including $11 billion from Medicare (of which $5.8 billion will come from reduced reimbursement of hospitals), per the CBO. Instead, the resolution postponed the sequester for two months, so hospitals still could be subject to reimbursement cuts down the road.
Given the acrimony of the 2012 presidential campaign and the prevailing tenor on Capitol Hill, this latest legislative outcome was probably what most people expected: certainly no long-term resolution, just a temporary patch. It will be interesting to see what kind of fiscal policy quilt will be pieced together by Washington in the coming months. Ken is Senior Vice President and Director of Healthcare Policy, MedeAnalytics Inc.
Publication Date: Wednesday, January 02, 2013