Ken PerezThrough March 1, 2013, President Barack Obama and congressional leaders were unable to reach an agreement to avert $85 billion of automatic spending cuts per the Budget Control Act of 2011’s sequester, so it appears that the cuts will be carried out. 

Three striking realizations came to mind as I reflected on this development. 

First, the powers that be in Washington, D.C., actually abided by a law of the land and did not resort to kicking the can down the road—what a concept! This flies in the face of 10 straight years of “doc fixes” to avoid the sustainable growth rate (SGR) provision, which was intended to restrain the growth of Medicare spending on physician services, albeit in a flawed manner, and most recently, January’s fiscal cliff patch. 

Second, for the foreseeable future, it seems clear that the reimbursement rate-setting process will be heavily impacted by deficit-reduction strategies. For hospitals and other healthcare providers, there will continue to be the specter of 2 percent funding reductions each year.

Third, as New York Yankee great Yogi Berra said, “It’s déjà vu all over again.” Much like the SGR, which each year presents a heretofore unsolvable conundrum, the sequester promises many more years of spirited philosophical and fiscal policy debate on what is the best way to reduce the federal deficit and promote economic growth. With the sequester’s roughly $875 billion of slated cuts over the next eight years, its “price tag” for repeal is more than six times that of the SGR ($138 billion), which, although lower than before, Washington will be greatly challenged to cover. 

Ken Perez is senior vice president and director of Healthcare Policy, MedeAnalytics, Inc., Emeryville, Calif.

Publication Date: Thursday, March 07, 2013