Federal Debt Commission Makes Unrealistic Recommendations

Karen Minich-Pourshadi, for HealthLeaders Media , November 15, 2010

The economic recession aside, now a 23% Medicare and Medicaid physician payment cut looms (as of Dec. 1 and another 1.9% cut will take affect as of Jan. 1). Now they will need to treat more patients and be paid even less money to do so.

What’s makes this list of recommendations so infuriating to healthcare leaders is that if it takes effect, folks in healthcare will be swimming upstream against a very hard current. You see, the 18-member committee is suggesting that the Medicare and Medicaid situation be remedied by savings made through payment reforms, cost-sharing and malpractice reform and long-term measures to control healthcare cost increases. Translation: expect to be paid even less for Medicare and Medicaid.

While the “chairman’s mark” proposes a repeal of the sustainable growth rate formula (SGR), it also recommends that payments be gradually lowered over the next 10 years, including a pay freeze for the next two to three years. The savings for this change would be substantial for the government—$24 billion by 2020. But for health systems, hospitals and practices already operating on thin margins, this is a potentially devastating decline in reimbursements.

Unfortunately, the bad news doesn’t stop there, however. If the recommendations take affect, they will also accelerate cuts to the disproportionate share payment (DSH) to hospitals, and will cut Medicare Advantage and home health, as well as federal spending on graduate and indirect medical education. Moreover, CMS will need to establish a new payment system (commencing 2015) to reduce healthcare costs and improve quality—and no one knows exactly what that could mean for healthcare providers.

The American Hospital Association and nearly every other major healthcare organization released statements pooh-poohing this committee’s recommendations, which isn’t surprising. I suspect most healthcare financial leaders were distressed too. I reached out to one health system, to gauge their reaction:.

“Coupled with cuts we’re anticipated to incur over the next four years, even if we are fortunate enough to avoid penalties for readmissions, value-based purchasing and hospital acquired conditions, this [report] just boggles the mind,” says John W. Winfrey, vice president and CFO for DCH Health System.

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2 comments on "Federal Debt Commission Makes Unrealistic Recommendations"

tkerr (11/16/2010 at 1:51 PM)
Everybody wants to go to heaven and nobody wants to die! A larger problem than cutbacks in healthcare payments to providers is the looming finacial train wreck if we dont reduce our deficit. Every group that is targeted, defense, farming, healthcare etc. will scream but EVERYONE must take a hit if we are to restore sanity to our fiscal policy. Suck it up and do better with less is the new reality for all Americans.

rswift (11/15/2010 at 11:10 PM)
I think the commission co-chairs did a pretty good job with their recommendations. Unfortunately, everyone thinks that there is an area that cannot be cut - be it health care, defense or farm subsidies. The reality of our healthcare system is that we are spending more per capita than every other country and with lower outcomes, have nothing to show for it. I agree that the answer is not ONLY unit cost reductions, but instead it requires a fundemental change in how we finance and pay for care. None of us may like the fee cuts, but to date nothing else has forced us to change the way we pay for & deliver care.




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