Sequestration is Around the Corner

With the automatic spending cuts known as “sequestration” set to go into effect tomorrow, a clearer picture is emerging regarding what effects these cuts will have on healthcare. As NAHAM News pointed out last week, only Medicaid and the Children’s Health Insurance Program (CHIP) are totally insulated from the cuts. Besides those, virtually every program in the healthcare world has something to lose starting in March

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According to The Hill, doctors and hospitals are estimating that Medicare cuts included in the sequester will cost the industry 200,000 jobs this year. That cut to Medicare, totaling about two percent or $11 billion this year, is relatively small in comparison to the cuts that some other healthcare agencies are facing, but large enough to create a state of unease. A day away from the deadline, it is still unknown how the two percent cut will be implemented throughout Medicare. Across the board cuts are unlikely due to standing contracts and commitments, so some areas with more discretionary spending may get hit harder than others where money is tied up. Of the cuts being discussed, the most likely to be included is directly related to doctor’s fees. Under this plan, doctors will see their Medicare reimbursements cut by two percent.  Since 2001, Medicare payments have risen by four percent while patient cost has risen by 20 percent.

In other healthcare areas, the Food and Drug Administration (FDA) faces an eight percent cut. This may force layoffs and furloughs, resulting in delayed approvals for new drugs and a decreased number of food inspections. Sequestration will also affect funding for some parts of the Affordable Care Act, cutting state health insurance marketplace grants by $66 million and reducing the public health trust find by $76 million. Despite that, experts don’t expect the implementation of the law to be slowed.

In a post released a few days ago, The Washington Post turned a press release put out by the White House into an interactive feature detailing how states and public programs would be affected by the sequester. According the post, funds would be cut from public health in the areas of threat response, substance abuse and prevention, HIV testing, and other cuts to public health programs.

Not all of these cuts could happen overnight. Even though it does not seem likely that Congress and the President will come to an agreement today, many cuts can be spared if a compromise emerges in the near future.