A lack of compromise by lawmakers in Washington could result in spending cuts that could affect local health providers within the next two months.
The cuts, also known as sequestration, have been a top issue for providers – especially hospitals – that receive federal dollars.
The money at stake is caught up in the package of spending cuts and tax increases that are to start taking effect Jan. 1 – unless Congress and the president act to modify the plan. Approved as part of a deal made by Democrats and Republicans last year, the package is now commonly known as a “fiscal cliff” because economists fear that if implemented, the spending cuts and tax increases will cause serious harm to the economy.
“It’s something everybody has their eye on,” said Bruce Witt, Via Christi Health government relations director.
If sequestration goes into effect, about 2 percent of all Medicare spending – or about $11 billion for the first year – would be cut on Jan. 2, according to the White House Office of Management and Budget.
For Via Christi Health, that means approximately $3.5 million in Medicare reimbursement cuts could be at stake for the remainder of the fiscal year, Witt said.
Witt says the lame-duck Congress in the post-election season will likely extend programs for three to six months and let the newly elected Congress deal with the issue.
But if the cuts take place, some providers aren’t entirely sure what the local impact would be.
“Anytime you have a large cut like that, you would always fear layoffs and cutbacks of that nature,” Witt said. “I don’t know what exactly Via Christi would do, but it could impact access to care and quality of care.”
Dave Sanford, CEO of GraceMed, a safety net clinic, which operates as a health ministry of the United Methodist Church, said that if sequestration goes through, some of GraceMed’s funding could be at stake.
Clinic officials also aren’t sure exactly how big the cuts might be. Federal and state funding comprise less than 15 percent of its overall budget, but that could still have significant impact on clinic services, Sanford said.
Cindy Samuelson, vice president of member services and public relations for the Kansas Hospital Association, said the group estimates about 4,600 jobs could be lost statewide in 2013 if sequestration goes through.
The entire Medicare share of sequestration for the next 10 years would be $123 billion, or about $43 billion for hospitals nationwide, Samuelson said.
Kansas hospitals’ share of that from 2013 to 2022 would be an estimated loss of $415.3 million in reduced Medicare reimbursements, or about $38.2 million in 2013.
Other funding cuts
Sequestration, or automatic cuts, would affect hundreds of programs and private companies that do business with the government. That includes the Defense Department and defense contractors, as well as social programs.
At the same time, a series of taxes – including payroll and income tax rates – will increase on Jan. 1 unless Congress acts to modify or delay the package.
In the plan approved by Congress and President Obama, half of the automatic cuts, totaling $1.2 trillion, would come from defense.
A report by the Congressional Budget Office last week concluded that if a deal is not reached to modify the pact, the measures called for in the “fiscal cliff” package would send the U.S. economy back into recession.
Contributing: Associated Press