Published by: Shawn Gremminger on 8/2/2011 9:41:30 AM
Late on Sunday, the White House and congressional negotiators finally reached a deal to raise the federal government’s debt ceiling while cutting spending. This final deal came weeks – if not months – too late, confirming the public’s negative view of Congress as a bunch of whiny, out-of-touch career politicians who can’t ever seem to find common ground. There’s no question that Congress is dysfunctional. The question I’d like to answer today is whether the final deal being enacted today is good or bad for safety net hospitals. As with anything coming out of Washington, the answer is not simple, and is subject to interpretation. Put simply – its good news, bad news:
1) Good news: They got a deal. A default would have been very bad for just about everyone. The cost of borrowing would have soared; the economy would have softened even more, likely going back in to recession. With the current Congress, there would have been almost no opportunity to move legislation to soften the blow for the safety net. Bad all around.
2) Bad news: The deal may have come too late. While the financial markets appear okay, credit rating agencies are saying that they might still downgrade the US’s AAA rating since it is clear that our policy-making system is dysfunctional. This would have ripple effects on borrowing for the rest of us, including safety net hospital systems.
3) Good news: The deal includes no up-front entitlement cuts. Medicaid, Medicare and Social Security are not included in up-front cuts.
4) Bad news: Up front cuts come down hard on domestic discretionary spending. Vital non-Medicare, non-Medicaid spending will be pinched significantly in the next decade to pay for the up-front cuts included in the bill. If you care about NIH research, workforce training, community health centers, poison centers or a myriad of other discretionary health care spending, it is difficult to celebrate this deal.
5) Good news: We live to fight another day – on better footing than before. The deal includes the establishment of a 12-person Joint Committee which will seek to recommend changes reducing the deficit by $1.5 trillion over the next 10 years. This Committee will include 6 Democrats and 6 Republicans and will make its recommendations by Thanksgiving. This provides NAPH and our hospitals with an opportunity to influence the outcome in a way that was difficult during the previous negotiation, where all decision making was being made behind closed doors at the White House and in just a few offices on Capitol Hill.
6) Bad news: Medicaid will once again be at the center of attention. Nothing is off limits in the joint committee’s discussions. We fully expect the myriad of Medicaid savings options (Blended FMAP with across-the-board cuts, reduced provider taxes, etc.) to back on the table for negotiations. We have a lot of work to do between August and November.
7) Good news: Medicaid is exempt from across-the-board cuts if the committee fails. If the joint committee fails to make recommendations, or if Congress fails to enact those recommendations, the bill calls for $1.2 trillion in across-the-board cuts to federal spending as part of a budget enforcement mechanism. However, Medicaid is exempt from those cuts. This is good for two reasons – one obvious and one less so. The obvious reason is that there is a reasonable chance that the joint committee will fail to make recommendations. If that is the case, Medicaid will not be cut at all. Less obviously, the Medicaid protection in the budget enforcement mechanism gives us a much better bargaining position in discussions with the joint committee.
8) Bad news: Medicare provider payment cuts are not exempt – and could be hit hard. While we managed to secure an exemption for Medicaid, Medicare would be subject to across-the-board cuts in the budget enforcement mechanism. These cuts would fall squarely on Medicare payments to provider and insurers. Congressional leaders have argued that by protecting Medicare benefits and eligibility, beneficiaries are protected from the cuts. As leading Medicare and Medicaid providers, we know this claim is simply false. Medicare already pays at only 91 percent of costs. Further reductions will limit beneficiaries access to care in a way that hurts seniors.
The conclusion for safety net hospitals: We should pat ourselves on the back for just a minute. Medicaid comes out of this negotiation in a way that is better than we might have expected. No immediate cuts and protection from possible across-the-board cuts down the road. But we can’t rest on our laurels. The members of the Joint Committee will be named in two weeks. They will make recommendations in less than four months. We have a lot of work to do.