Steeper Medicare expense cuts on horizon despite failure to reach deal « Health Insurance Advisory

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Steeper Medicare expense cuts on horizon despite failure to reach deal

Author: Administrator | Dec 01 2011 | Medicare

The inability of the congressional “Super Committee” to reach a deal automatically triggers a 2 percent across-the-board reduction in Medicare expenses, the government program that provides health insurance coverage to millions of older and disabled Americans. Slated to begin in 2013, the automatic Medicare expense cuts do not even represent a small dent in the U.S. healthcare industry, especially compared to the significant deficit reduction legislation of the past, such as the 1990s.

The automatic cuts are likely to hit hospitals the hardest, since they are the biggest recipients of Medicare payments, accounting for nearly 50 percent of the program’s spending, according to federal statistics.

Doctors will likely suffer twice from the failure of the Super Committee to reach a deal. The breakdown in negotiations crushed hopes among doctors the panel would eliminate almost 30 percent in Medicare payments. These cuts are scheduled to go into effect in January under a 1997 balanced budget law. The permanent “doc fix” would have cost nearly $300 billion in lost savings, making it unlikely at a time of deficit reduction. Analysts said the best healthcare providers can hope for is another short-term fix to hold off the payment reductions. The automatic cuts will also reduce funding for health insurers that participate in Medicare Advantage, a popular program that allows senior citizens to purchase private insurance.

The breakdown of deficit talks represents a temporary reprieve from steeper Medicare expense cuts that will be necessary in coming years, as the nation’s population ages and draws on federal benefits. Medicare, Medicaid and Social Security will consume 100 percent of all tax revenues by 2047, according to the Government Accountability Office (GAO) if nothing changes.

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