Debt “Deal”: Not As Bad for Medicare as Expected, Medicaid Spared
So we have a deal on the debt ceiling. The President is now authorized to raise the debt ceiling by at least $2.1 Trillion. The roughly $2.5 Trillion in cuts over 10 years represents 5% of expected Federal spending over that time period. $917 Billion in cuts are made up-front. A joint bipartisan committee will then decide on an additional $1.5 Trillion in cuts by November 2011 for a December vote.
If the evenly divided committee failed to agree to the required amount of cuts, Congress would either have to approve a balanced budget amendment to the Constitution (which doesn’t stand a chance of being ratified), or accept an across-the-board cut in spending, with 50% coming from defense programs beginning in 2013 (military pay and veterans’ benefits are exempt). Medicare would also sustain cuts, but only up to a point. Medicaid and Social Security were exempted.
Putting “sacred cows” on the chopping block, like national security for Republicans and Medicare for Democrats, was to provide a strong incentive for the joint committee to avoid gridlock and deliver a plan that could pass Congress. I could see these “incentives” working on Democrats, who just folded AGAIN to the demands of the far-right House GOP. The Tea Partiers just showed they’re willing to flirt with global economic ruin — what’s a few billion to the Pentagon or the Department of Homeland Security to them? Expect another budgetary “High Noon” right around the holidays.
Physicians and other providers could see an additional 2 percent pay cut on top of double-digit Medicare reductions already slated for 2012 under the “deal”. The now-29% pay cut for physicians is scheduled to go into effect this year unless there’s a fix to Medicare’s Sustainable Growth Rate formula, as well as an 11 percent regulatory hit to home health agencies.
The White House said last night the Medicare cuts would hit providers but would not directly affect beneficiaries, but of course they do — mainly in providers’ willingness to continue to accept Medicare patients. There wasn’t specific mention of Medicare Advantage or Part D plans — but if the “doc fix” doesn’t happen, that 29% cut in traditional Medicare could translate into a 7% hit to Medicare Advantage rates in 2013.
What to expect in the coming months? Two of the proposals in the Bowles-Simpson bipartisan deficit reduction committee’s December 2010 report will get more attention: increasing the Medicare eligibility age from 65 to 67, and moving dually-eligible beneficiaries into health plans, which would curry huge state support. As a general proposition, the Administration will likely bend over backwards to provide states with greater flexibility in how Medicaid dollars are spent through the state waiver process.
It’s hard to call this anything but a political rout for Obama and the Democrats. A few weeks ago they had the Republicans over a barrel on the Ryan Medicare reform plan. Now they’ve handed the Tea Party several opportunities where they can create a global financial crisis unless the President caves, and he’s now shown for a third time that he will.
My favorite wonk, WaPo’s Ezra Klein, called this a “terrible, horrible, no good, very bad deal” and I couldn’t agree more. He went on to say that “Today, the markets are breathing a sigh of relief because Washington managed to agree before it sparked an unnecessary financial crisis. But we could be celebrating an agreement that actually did what was necessary to speed the recovery now and reduce the deficits that matter. Congress may be patting itself on the back because it didn’t needlessly wreck the global financial system, but that’s not evidence of success. It’s evidence of how terribly they have failed us. And the fact that so many are celebrating this deal only goes to show how used to their failures we have become.”