FAQ: Debt Deal 'Super' Committee's Impact On Health Spending Explained

Mary Agnes Carey and Phil Galewitz
August 10, 2011

The deal
President Barack Obama and Congress struck this week to raise the
nation's debt ceiling has prompted many questions about how a special
"super committee" established by the law will affect federal health care

By the day before Thanksgiving, the bipartisan, bicameral panel
of 12 lawmakers must report recommendations to trim at least $1.2
trillion in federal spending over the next decade. If the committee
members don't reach consensus, or if Congress does not approve a package
they offer by Dec. 23, a series of automatic spending cuts would kick
in by 2013, creating additional pressure on the panel to act.

Here's a guide to how the panel's deliberations could influence Medicare and Medicaid.

Q: Aren't Medicare and Medicaid protected from cuts right now?

A: Yes—and no. The debt deal, which was signed into law by Obama
on Aug. 2, makes $917 billion in discretionary spending reductions
during the next decade. Neither Medicare nor Medicaid would be touched
in those reductions.

However, that changes a bit in the second round of funding cuts
called for in the law. Between now and Nov. 23, the super committee is
asked to find at least an additional $1.2 trillion in debt reduction
over 10 years. The panel can make those recommendations by changing any
part of the budget. The committee could recommend cuts in entitlement
programs, including Medicare and Medicaid. It could also propose tax

Q. Won't deep differences between the parties over the
structure and future of entitlements and taxes prevent the panel from
reaching any agreement?

A. Democrats are sure to insist on tax increases to match any
spending cuts, which will anger Republicans, and Republicans will surely
want entitlement cuts, which will upset Democrats.

Stan Collender,
a partner at Qorvis Communications and former congressional budget
staffer, said he gives less than 5 percent chance the committee will
come to an agreement that Congress will approve. "In an era of hyper
partisanship have you seen any other special committee of elected
officials come up with some broad-based deficit reduction package
looking at tax increases and spending cuts?" he asks.

If Congress doesn't agree on a debt plan, the current law has a
trigger mechanism that will automatically guarantee the $1.2 trillion
savings beginning in 2013 through cuts in defense and other federal
spending. Included in these cuts would be is a 2 percent reduction in
Medicare payments to hospitals and other providers. Medicaid funding
would not be touched by that trigger.

Sen. Pat Roberts, R-Kan., describes the idea of across-the-board
cuts as "Armageddon" because of their severity and that half of the cuts
would have to come from defense. "You can't cut defense by 50 percent.
You can't cut Medicare providers, including doctors, more," Roberts

Q: There have been plenty of commissions that have worked on debt reduction, including the Simpson-Bowles panel last fall. What makes this different?

A: The threat of the automatic, across-the-board spending cuts is
what gives the debt panel more clout than its predecessors, including a
established by Obama and co-chaired by former Sen. Alan Simpson,
R-Wyo., and former President Bill Clinton's chief of staff Erskine
Bowles. Many lawmakers dislike the idea of surrendering any power over
the federal purse, especially when it could mean that spending on a
favorite program could be at risk.

The committee will look at many of the same alternatives as the deficit task forces earlier this year formed by Obama and the Bipartisan Policy Center,
which was headed by President Clinton's budget director Alice Rivlin
and former Senate Budget Committee chairman Pete Domenici, R-N.M., and a
plan formulated by a bipartisan group of senators known as the Gang of Six.

Q. What else will the super committee be looking at?

A. Among some of the alternatives expected to be considered are
Medicare premium supports, which would give enrollees vouchers or credit
to purchase a private insurance plan rather than having the government
directly pay for covered services; converting Medicaid to a block grant
program, which would also limit federal funding; or asking higher-income
Medicare beneficiaries to pay more for their coverage. Changes in
spending for the 2010 health care overhaul may also be considered.

Collender doubts Democrats on the committee would accept major changes to either Medicare or Medicaid.

"I don't see the trigger as a sort of sword hanging over their
head," he said, noting that Congress can always vote again to reverse
the cuts planned under the trigger. He said if the economy continues to
falter, he would doubt Congress would allow funding cuts to occur.

But Bob Crittenden, executive director of the liberal Herndon
Alliance, said Medicaid is most at risk in the super committee because
the group is unlikely to agree on cuts to Medicare or Social Security.

Steve Bell, senior director or the economic policy project at the
Bipartisan Policy Center, said he expects the super committee will lead
Congress to make some cuts to the deficit but no dramatic restructuring
to entitlement programs. That’s because the savings goal is not high
enough and the two political parties can’t agree on the main options to
reduce spending in Medicare and Medicaid. "You will get out of this what
you got out of the last four months—something mushy in the middle that
does not address the underlying fiscal crisis," he said.

Q. Why are Medicare and Medicaid part of the debt discussions?

A. Medicare and Medicaid make up about 23 percent of federal
spending and their costs have been growing faster than the overall
economy. Spending for both programs is rising as a result of overall
cost of health care, but each has its own issues. Medicare costs have
climbed partly due to the aging population, which has meant more people
are eligible for coverage under the program. Medicaid costs increased
with the recent economic downturn, which led to dramatic uptick in
enrollment as people lost jobs and private health coverage.

Q. What do doctors and hospitals say about the cuts proposed as part of the automatic trigger?

A. Although the debt ceiling law says that only Medicare
providers could face cuts, providers say those reductions could impact
their ability to deliver medical care and impact beneficiaries.

"From our view, there's no separation between these kinds of
provider cuts and something that will affect beneficiaries," said Chip
Kahn, president and chief executive officer of the Federation of
American Hospitals. "It will affect the way providers operate and at
some point this artificial separation between things that affect
beneficiaries and provider cuts has got to be identified for what it is –
an artificial break. If it affects providers, it affects

Rich Umbdenstock, the American Hospital Association president and
chief executive, echoed that sentiment. In a statement he said cutting
hospitals will mean decreased access for seniors. "That’s why the total
Medicare program – including caregivers – should be exempt" from cuts
that he said could overload emergency rooms, shut trauma units and
reduce patient access to the latest treatments.

Q. How does a "fix" to Medicare's doctor payments figure into the issues facing the super committee?

At the end of the year, Medicare is scheduled to cut pay to
physicians by about 30 percent. That is caused by a budget rule adopted
years ago. Since 2003 each time the requirement has come due Congress
has averted it. Some analysts argue that the debt reduction efforts and
the need to fix the doctor reimbursement formula could collide,
especially because of the cost of fixing doctor pay. Pushing the issue
off for another year would cost about $25 billion, although doctors have
been pressing for a two-year fix at a cost of roughly $50 billion.
These fixes would add to the nation’s deficit and complicate the super
committee's work.

Q. This sounds similar to the BRAC (Base Realignment and
Closure) commission used by Congress to decide which military bases to
close. Will it work the same?

BRAC was an
independent nine-member panel appointed by the president that evaluated
which bases to close from 1998 to 2005. Once that list was approved by
the president, Congress could change it only by voting down the list in
its entirety.

Similar to BRAC, the super committee's recommendations will face
an up-or-down congressional vote. Congress will not be able to amend the
recommendations. But the super committee's charge is far broader than
BRAC since it will be able to make recommendations on cutting or
changing any type of government program. It also will have to grapple
with deciding whether to recommend raising taxes.

"This is a heckuva lot bigger than BRAC—the concept is the
same—but its purview is the broad range of government and entitlement
programs," said Robert Bixby, executive director of the nonpartisan
Concord Coalition, a budget watchdog group. He gives the committee less
than a 25 percent chance of coming to an agreement.



This article was reprinted from kaiserhealthnews.org with
permission from the Henry J. Kaiser Family Foundation. Kaiser Health News, an
editorially independent news service, is a program of the Kaiser Family
Foundation, a nonpartisan health care policy research organization unaffiliated
with Kaiser Permanente.

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