January 2, 2013
Fiscal Cliff Delays Medicare and Medicaid Cuts
The fiscal cliff deal that Congress passed yesterday postpones a 26.5 percent Medicare pay cut for one year and preserves a hefty Medicaid raise for those in primary care. The huge Medicare cut, determined by the program’s sustainable growth rate formula, was set to take place on January 1, 2013.
The fiscal cliff bill, called the American Taxpayer Relief Act of 2012, preserves tax cuts for individuals earning no more than $400,000 and couples earning no more than $450,000. The American Taxpayer Relief Act also delays sequestration until March 1, 2013, which provides lawmakers two months to replace it with a more specifically targeted deficit reduction plan, extends unemployment insurance benefits and numerous tax credits. The Act easily passed in the Senate 89 to 8, and 257 to 167 in the House of Representatives.
However, the most important parts of the American Taxpayer Relief Act concerns Medicare and Medicaid. If Congress had not passed the Relief Act, Medicare providers would have taken a significant payment cut. The Relief Act freezes Medicare rates for one year. While freezing the current Medicare rates is not exactly good news, considering the fact that most nursing homes and other senior living facilities are not receiving sufficient reimbursements right now. However, a freezing of insufficient rates is certainly better than a steep decrease.
The American Taxpayer Relief Act does not attempt to offset the $25 billion cost of freezing the Medicare rates by cancelling a Medicaid pay raise for primary-care physicians authorized by the Affordable Care Act. The Affordable Care Act raises Medicaid rates to Medicare levels for evaluation and management services and vaccine administration. Family physicians, general internists, pediatricians and subspecialists related to these fields are eligible for the increase. Republicans initially favored eliminating the Medicaid raise to fund a one-year doc fix, an idea that provoked strong opposition from organized medicine.
Unfortunately, The American Taxpayer Relief Act did have to offset the $25 billion cost of freezing Medicare rates. The Medicare rate freeze is going to be funded largely by reducing Medicare outlays to hospitals. Of course, this means that many services will have to be cut, staffs will be reduced and, in some cases, patients may have to be turned away.
While many around the country are breathing a sigh of relief that the fiscal cliff was avoided, there are still many important nursing home-related issues that remain undecided. For example, with Congress pushing the sequestration deadline to March 1, 2013, the debate will continue as to whether the 2 percent cut in Medicare reimbursements will remain.