Health world braces for sequester

Every corner of the healthcare world has something — and potentially a lot — to lose from the $85 billion in automatic spending cuts set to hit the government on March 1.

Doctors and hospitals say the sequester’s Medicare cuts will cost their industries more than 200,000 jobs just this year.

A reduction in food inspections could lead to more food-borne illnesses, the White House has warned.

ADVERTISEMENT
And advocates for medical research say their work could be set back a generation.

With the cuts looking increasingly inevitable, healthcare industries that have spent the past year lobbying Congress to cancel the sequester are now turning their attention toward absorbing its cuts.

“It’s one in a long series of indignities hat they have suffered, and it just accumulates,” said Dan Mendelson, founder and CEO of the consulting firm Avalere Health. “I think most providers are at this point girding themselves by trying to reduce costs.”

While Medicaid and the State Children’s Health Insurance Program are exempt from the talks, most other health programs will be affected.

The sequester includes a 2 percent cut to Medicare, as well as much larger cuts to federal healthcare agencies. The Medicare cut is big — $11 billion just this year, according to the White House budget office — but the agency cuts are more unpredictable.

The Food and Drug Administration, for example, would have to absorb an 8 percent cut this year. Most of its expenses are people, not programs, so employees would have to be laid off or furloughed. Those losses could cause delays in the approval of new drugs and medical devices.

“The FDA is having enough trouble retaining their good people,” Mendelson said. “I would expect approval times to suffer as a result.”

Longer reviews are dangerous to drug companies that are hoping to bring new products to market. The FDA would also have to conduct about 2,100 fewer food safety inspections, according to data from the Health and Human Services Department.

Sequestration would also make some big cuts to part of President Obama’s healthcare law. Grants to help states establish insurance exchanges would be slashed by $66 million, and the law’s prevention and public health trust fund would lose $76 million.

Mendelson said he doesn’t expect sequestration to slow implementation of the law.

There are also lingering questions about how the Medicare agency would implement a 2 percent Medicare cut.

If the agency meets that target by cutting evenly across all of its accounts, every doctor and hospital would see a cut of roughly 2 percent. But there’s some concern that such an even distribution won’t be possible, and some sectors could end up taking a bigger hit than others.

One healthcare lobbyist said hospitals are worried that they’ll end up with especially big cuts, largely because other parts of the Medicare program run on contracts that have already been set.

Medicare’s drug benefit, for example, would be hard to cut until drug makers renegotiate their contracts with the program later in the year

The consequences for doctors are probably more predictable than for other sectors, experts said, but they’re still severe. Doctors would see their Medicare payments cut by roughly 2 percent — a small enough cut to plan for, but one that follows on a series of previous reductions.

"If Congress does not act to stop the sequestration cuts, Medicare patients and physicians will suffer real consequences. Since 2001, Medicare payments for physician services have only increased by four percent, while the cost of caring for patients has increased by more than 20 percent. A two percent cut would only widen this already enormous gap between what Medicare pays and the cost of providing care to seniors.

The American Hospital Association and the American Medical Association said in a joint study last year that their two industries would have to shed 211,000 jobs just this year if the sequester takes effect. They said the toll would rise every year as more of the sequester’s cuts take effect, soon topping 300,000 jobs lost each year.

Advocates for medical research have also warned that sequestration would devastate important projects. The White House’s 2012 outline called for an 8 percent cut to the National Institutes of Health — roughly $2.5 billion this year alone.

The group United for Medical Research said in a report last week that sequestration’s cuts to the NIH budget could cost the country 20,000 jobs.


More in Health reform implementation

ObamaCare fines loom for uninsured

Read more »