Medicare Cuts Loom Large as 'Cliff' Nears

Failure to reach agreement will mean a 28.5 percent cut in Medicare payments.

ByABC News
December 28, 2012, 5:22 PM

Dec. 29, 2012— -- WASHINGTON -- It's looking less and less likely that Congress and the White House will strike a deal to keep the country from falling over the "fiscal cliff" next week, so physicians are preparing for a 28.5 percent cut in Medicare payments that will take effect on Jan. 1.

That figure includes a 26.5 percent cut under Medicare's sustainable growth rate (SGR) reimbursement formula and a 2 percent cut mandated by the Budget Control Act, the piece of legislation that outlined the tax increases and spending cuts that define the fiscal cliff.

"Given the current progress with the legislation, CMS [the Centers for Medicare and Medicaid Services] must take steps to implement the negative update," the agency said in a Dec. 19 notice on its website.

CMS will continue to pay claims for services rendered on or before Dec. 31 at current rates, and made it a point the remind doctors of the agency's payment schedule: clean electronically transmitted claims are paid no sooner than 14 days after submission and payment on clean paper claims takes at least 29 days.

"CMS will notify you on or before January 11, 2013, with more information about the status of Congressional action to avert the negative update and next steps," the notice stated. The message, some believe, is that physicians should take their time submitting claims.

As has been the case in previous years, the minimum two-week delay in claim processing allows CMS to pay for services at the normal rate if Congress retroactively repeals the SGR cuts while a broader budget deal is negotiated.

Any action on the SGR, however, may not have an effect on the 2 percent cut mandated in the Budget Control Act, which calls for a 9.4 percent cut in most parts of defense spending and an 8.2 percent cut for most nondefense agencies.

Medicaid, veterans health programs, and the Vaccines for Children program are all exempt from automatic spending cuts. Some -- but not all -- community health centers are limited to a 2 percent cut, like Medicare.

The National Institutes of Health is slated to lose a whopping $2.5 billion from its fiscal 2013 budget under the mandatory spending cuts, translating to 700 fewer grants per year.

The CDC stands to lose $464 million. The FDA would see its budget slashed by $318 million and the Substance Abuse and Mental Health Services Administration $275 million.

Although no one expects all the cuts to last in the long-term, neither the White House nor any federal agencies have spelled out what impact the cuts will have in the short term.

Federal health agencies contacted by MedPage Today declined to comment on how they were planning to handle the spending cuts and referred us to the White House's Office of Management and Budget (OMB). OMB didn't return a request for comment.

Although the OMB has outlined how much money each agency should cut, there are no publicly available details on what programs will be affected by the cuts.

"There is no fixed list of activities that the FDA will drop without this money, but significant programmatic and manpower reductions would be impossible to avoid," Steve Grossman, deputy executive director for the Alliance for a Stronger FDA, wrote on the advocacy group's blog. "Mission failure may not be an option for FDA, but it will be very hard to avoid."

There is also an option for President Obama to order the Treasury Department and OMB to delay implementing the sequestration if a deal is imminent.