White House projects $11 billion Medicare cut as result of deficit law

September 20, 2012

The Obama administration released official projections last month showing that the Medicare program will be cut by roughly $11 billion dollars next year unless Congress approves legislation overriding automatic spending reductions required under a 2011 deal to raise the debt ceiling and reduce net federal spending.

After bipartisan deficit-reduction negotiations stalled, the Budget Control Act’s (BCA) default trigger mechanism kicked-in and now requires implementation of $1.2 trillion in cuts to defense and non-defense discretionary spending over the next ten years, including a two percent cut in the nearly $555 billion that Medicare plans to spend on providers and insurance plans in 2013.

AOA volunteers and staff originally opposed this plan and will continue working with lawmakers and White House officials on a plan to avert this scenario. AOA is reminding policymakers that these Medicare cuts could not come at a worse time as the reductions could be in addition to massive Medicare pay cuts already scheduled to take effect at the beginning of the year.

As previously reported by AOA News, Congress originally created the bipartisan “super committee” last year in an effort to break the Capitol Hill stalemate over legislation needed to raise the national debt limit. The deal included strong disincentives for both parties by requiring automatic cuts, or sequestration, to defense and non-defense program should lawmakers fail to find agreement on a deficit-reduction plan.

The law charged the 12-member bicameral committee with finding $1.5 trillion in deficit reduction over ten years. The plan needed to be approved by both houses of Congress and signed into law by the president on or before Dec. 23, 2011. In the end, lawmakers were hopelessly deadlocked and a comprehensive plan failed to materialize. As a result, across-the-board cuts will kick-in starting next year, barring corrective legislative action.

Capped at two percent, the Medicare reductions will apply to Medicare Advantage plans, Part D plans, and Medicare providers, including but not limited to hospitals and physicians. While the White House has generally not outlined the specific impact of sequester on Medicare physicians, the Obama administration did specify that roughly $5.8 billion of the overall Medicare reduction will come from the Federal Hospital Insurance Trust Fund.

The Obama administration has indicated that it opposes implementation of sequester, but remains deadlocked with Republicans over sharp differences in preferred approaches to replace the coming spending reductions while achieving the same amount of deficit reduction. Congressional Republicans are also concerned about implementation of sequester, particularly with the roughly $500 billion in cuts to the Pentagon budget.

While continuing to fight against Medicare pay cuts to ODs as a result of sequestration, AOA is warning lawmakers that, if enacted, these cuts would only compound an already dangerous situation. Without corrective action, Medicare payments to ODs and other physicians are scheduled to be slashed by nearly 30 percent starting Jan. 1, 2013. And adding insult to injury, Medicare physician payments have been nearly frozen for a decade, while the cost of caring for patients has increased by more than 20 percent.

Leading efforts to turn back planned Medicare pay cuts, Ron Hopping, O.D., AOA president, and Dori Carlson, O.D., AOA past-president brought AOA’s pro-patient, pro-access message directly to White House officials and top policymakers at the U.S. Department of Health and Human Services earlier this year at a special White House meeting.

AOA Board of Trustees members Barb Horn, OD, Steve Loomis, OD, and others have also traveled to the nation’s capital over the last few months to help spread the message around Capitol Hill and within federal agencies that planned Medicare payment cuts, whether from the sequester or as a result of Medicare’s flawed SGR pay formula, will be disastrous for ODs and patients.

While lawmakers have left the nation’s capital to return home to campaign in the run-up to the Nov. 6 election, AOA will keep up the pressure on Congress to come together on a plan that would avert massive Medicare pay cuts. AOA members can join this ongoing effort by taking action on AOA’s Online Legislative Action Center, by becoming an AOA Federal Keyperson and investing in AOA-PAC.

For more information on this important topic, contact the AOA Washington office team at 1-800-365-2219 or ImpactWashingtonDC@aoa.org.

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