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Congress clears six-month funding measure that keeps sequesters Medicare cuts intact

March 22, 2013

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Congress this week cleared for the president’s signature a continuing resolution, H.R. 933, which will keep the government funded through the end of the fiscal year (FY) on Sept. 30. The president soon is expected to sign the measure into law, assuring that the government stays open when the current funding measure expires March 27.

H.R. 933 retains the $85 billion in automatic spending cuts that took effect March 1 under the 2011 “Budget Control Act,” including the 2% reduction to providers’ Medicare payments. It will give the Pentagon and other federal agencies, including agriculture,
commerce, science, justice and homeland security, more flexibility to implement the cuts – an acknowledgement that the reductions imposed by the sequester will remain in place until Congress and the administration can agree on a deal to replace them.

The measure also will provide a $71 million increase for the National Institutes of Health. In addition, it requires the Department of Health and Human Services to allocate $3.1 billion in FY 2013 funding for community health centers by the end of this fiscal year, as recommended by the Senate Appropriations Committee in its FY 2013 spending bill.

On Thursday, the House also adopted a budget resolution for FY 2014 that offers a sharp contrast to the resolution pending before the Senate, which is expected to pass its version later today or possibly tomorrow. While both budgets are only blueprints, as will be the president’s budget now expected in early April, they set baselines that could come into play if the concept of a “grand bargain” re-emerges.

The House-passed budget would cut more than $4.6 trillion in government spending over the next 10 years. About $2.7 trillion of the proposed spending reduc­tions would come from health care, much of which is achieved by savings attributed to repealing the coverage provisions of the “Patient Protection and Affordable Care Act” (ACA) while maintaining the ACA’s reductions.

The plan also recommends reforming the medical liability system; increasing means testing for Medicare Parts B and D; repealing the ACA’s Independent Payment Advisory Board; and establishing a deficit-neutral reserve fund to address the Medicare physician payment formula. Physicians face a 25% reimbursement cut on Jan. 1 without another short-term “doc-fix” by the end of the year.

Starting in 2024, Medicare would transition to a premium support program under the House budget. Workers currently under age 55 would choose between private plans and a traditional feefor- service option through a newly created Medicare Exchange. The budget also would convert Medicaid into a block grant program and reduce federal Medicaid spending by $756 billion over 10 years.

The Senate is considering a budget resolution that includes $1.85 trillion in savings over 10 years through an equal combination of tax revenue increases and spending cuts. The proposal calls for $975 billion in additional revenue, primarily through closing tax loopholes. The budget also proposes $500 billion in domestic cuts, including $275 billion in yetto- be-specified health care reductions; $240 billion in defense spending cuts; and $242 billion in reduced interest payments.

The savings in the Senate’s budget would replace the sequestration cuts. The proposed health care savings would be achieved by building on the delivery system reforms included in the ACA and “further realigning incentives throughout the system, cutting waste and fraud, and seeking greater engagement across the health care system.”

Each chamber is supposed to pass a budget resolution and then work together to reach a compromise on a single, final plan before the start of the fiscal year on Oct. 1. That has not happened in many years and is not likely to this year, either, given the different policy viewpoints in both proposals.

Congress is preparing to leave for a two-week recess. Looming on the political horizon is the mid-May expiration of the nation’s borrowing authority. The government could delay the impact of the debt ceiling until early August. Congress authorized a suspension of the debt limit through the original May 19 deadline, but made it contingent upon the House and Senate each passing their own budget.