Sequester Arrives with 2% Cut to Medicare and No SGR Fix in Sight

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Although Medicare spending is shielded from the largest across-the-board mandated cuts known as the the sequester, the cuts to Medicare will still total $11.1 billion for fiscal 2013 according to the Bipartisan Policy Center.

This cut comes on top of the nearly 30% cut to Medicare physician payments mandated by the sustainable growth rate (SGR) formula that would kick in at the end of this year unless Congress acts to stop it. In addition, the cuts may be especially hard on radiologists as they are facing additional cuts in 2013. The most notable of these cuts is the multiple procedure payment reduction (MPPR) on the professional component of imaging.

On February 21, the American College of Radiology (ACR) joined more than 100 other national medical societies and state medical associations in signing a letter to the U.S. Senate urging action to avoid the sequester cuts to Medicare, as well as the SGR. ( Read the letter here.) However, neither the Democratic nor the Republican proposals to cushion the severity of the cuts managed to earn enough support to pass yesterday.

The Democratic proposal would have ensured Medicare and Medicaid funding was left untouched. The Republican proposal would have left it up to the president to submit a proposal by March 15 for an alternate plan to cut $85 billion in spending with the stipulation that no more than $42.6 billion could be cut from military spending. As such, it would likely have required major cuts in health care spending and was therefore opposed by medical groups like the American Hospital Association.

Susan L. Turney, MD, MS, FACMPE, FACP, the president and CEO of the Medical Group Management Association (MGMA) and the American College of Medical Practice Executives (ACMPE), expressed her disappointment in Congress failing to prevent the sequestration cuts and act on the SGR in a statement issued today.

“This arbitrary and formulaic approach destabilizes Medicare at a time when Congress should be focused on implementing policies to achieve a high performing patient centered program,” she warned. “We urge Congress to seek a responsible, comprehensive deficit reduction package that reverses the Medicare sequestration cuts and repeals the SGR once and for all.”

The 2% across-the-board cut to Medicare will become effective on April 1. Most large hospital networks leaders interviewed by media outlets this week say they have already planned for the cuts under a “worst-case scenario” approach to budgeting.

David P. Blom, president and chief executive officer of OhioHealth, a Columbus-based not-for-profit network of 18 hospitals and 23 health and surgery centers, home-health providers and other facilities, told Kaiser Health News that the cuts will reduce OhioHealth’s revenue by $12 million each year, but that he was actually more concerned about future cuts as the sequester cuts do little if anything to reform health care and control costs long term. This sets the stage for more and more rounds of arbitrary cuts.

“Can we live with it? Yes. I think we’re able to live with it because we’ve anticipated it for some time,” Blom said in the interview. “What I’m concerned about is even this sequestration won’t be enough. So what is the next thing we’ll be living with to deal with this national debt situation?”