While many in Washington, D.C. are celebrating today the unusual display of bipartisan budgetary comity as the new budget deal is announced, there is a direct and immediate adverse effect for hospitals and physicians. As predicted by Sheppard Mullin Healthcare Team leader Eric Klein in his recent talk to the National ACO Congress, Congress has chosen to cut payments to Medicare providers as a principal funding mechanism for the budget deal. The early analysis of the budget proposal has the current sequestration cuts for Medicare being maintained and extended for another two years beyond their current term. Per a published report this morning, “The budget proposal saves $28 billion over ten years by requiring the President to sequester the same percentage of mandatory budgetary resources in 2022 and 2023 as will be sequestered in 2021 under current law.” (Huffington Post). In non-Congressional English, the 2% Medicare sequester now will stay in effect as a baseline through 2023, becoming the “new normal.”
Aside from the obvious direct economic impact to revenue and profit in the healthcare industry, a greater concern looms. In discussing the rationale for the budget deal, an unnamed Congressional staffer involved in the negotiations said that Medicare provider reimbursement cuts were “an easy target” for deficit reduction. We continue to be concerned about the possibility of further rate cuts in the period prior to the 2016 presidential election as both political parties will need to show positive movement in controlling the rise of healthcare costs and deficit reduction.