Super committee failure leaves Medicare pay cuts in place

Deficit panel inaction will trigger a $1.2 trillion federal spending reduction that could cut Medicare pay even more starting in 2013.

By Charles Fiegl — Posted Nov. 21, 2011

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Roughly $1.2 trillion in automatic cuts over 10 years will hit federal programs, including Medicare, after lawmakers on a special 12-person bipartisan deficit reduction committee failed to develop a consensus plan.

Leaders of the Congressional Joint Select Committee on Deficit Reduction announced on Nov. 21 that they would not be able to reach an agreement on a spending cut plan by the Nov. 23 deadline set by Congress. Organized medicine had hoped the committee would strike a deal that not only met the panel's minimum goal but that also fixed the long-term physician payment problems plaguing the Medicare program. Its failure means that unless lawmakers act to change the outcome, the sustainable growth rate formula will cut physician pay by 27.4% in 2012 and by an additional amount in 2013, and the automatic spending cuts will decrease pay even further starting in 2013.

American Medical Association President Peter W. Carmel, MD, said lawmakers on the committee missed a unique opportunity to fix the SGR formula, avoid further cuts to doctors and preserve beneficiary access to care.

"The failure of the deficit committee forces our nation to continue on an unsustainable path that puts current and future generations of Americans at risk for harsh consequences," Dr. Carmel said. "Congress set up processes and procedures that could have charted a course to put our nation's fiscal house in order. The stalemate in the deficit committee will trigger robotic, across-the-board spending cuts, which will not address critical structural problems in the federal budget."

Congress had created the panel, which many dubbed the super committee, as part of an agreement to raise the federal debt ceiling in August. The Budget Control Act gave the committee the task to develop a plan to reduce budget deficits by at least $1.2 trillion between 2012 and 2021. Failing to agree on any plan would trigger 10-year spending cuts equal to $1.2 trillion starting in fiscal 2013, divided roughly equally between defense spending and nondefense spending.

The act specifically exempted Medicare patient benefits from being impacted by the automatic spending cuts, meaning that Medicare pay to health professionals would be on the chopping block. The statute does cap the amount of cuts from Medicare as a whole to 2% per year, amounting to a $123 billion decrease in program spending over the decade, according to a Sept. 12 Congressional Budget Office report.

The projected effect of the automatic cuts on physician pay is not yet known. The White House would determine proportional budgetary reductions annually, and the president then would order the necessary cuts, according to the CBO. Congress could vote to roll back some or all of the automatic reductions contained in the budget act's fail-safe mechanism, and some lawmakers indicated that they might attempt to do that for certain defense spending and other priorities. But President Obama warned Congress against trying to escape its budgetary responsibilities and the White House indicated that he would be willing to veto such legislation.

Meanwhile, the federal government avoided its latest shutdown on Nov. 18 as Obama signed legislation to keep federal agencies funded through Dec. 16. Another appropriations bill would be needed to fund the government after that date.

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