March has arrived and Congress hasn’t passed an alternative deficit-reduction package. That means Medicare provider payments began being cut by 2% on March 1, 2013 as required by the Budget Control Act of 2011 (Sequestration).
The health care industry will be impacted by government program spending reductions of $3 billion in the current fiscal year, according to updated estimates released by the Congressional Budget Office (CBO).
The cuts will undoubtedly affect job growth in the health care industry, reports MedicareNewsGroup. The direct loss in the health care sector is estimated to be 330, 127 jobs by 2021, according to a joint study released by the American Medical Association, the American Hospital Association and the American Nurses Association.
496, 000 Jobs Lost
The report says job losses would ripple across the economy. In just the first year of the sequester, it is estimated that health care and its related industries will lose more than 496, 000 jobs, These numbers include those employed in the health care sector, as well as those affected by the purchases made by health care organizations and their employees. The analysis estimates the number of lost jobs will reach 766, 000 by 2021.
The top five industries with the most job losses in 2013, because of sequestration are, from highest to smallest: hospitals; physicians’ offices, dentists and other health practitioners; nursing and residential care facilities; medical and diagnostic labs, and outpatients and other ambulatory care services; and home healthcare services.
Skilled Nursing Care Hit Hard
The Alliance for Nursing Home Care, which analyzed the effect of the sequestration cuts and the cuts mandated by the Affordable Care Act, found that more than one-third of nursing facilities that responded to a survey said they were planning to lay off direct service staff such as registered nurses, licensed practical nurses, certified nursing assistants, therapists and other staff. More than one-half of respondents said they had plans to reduce benefits, while about three-quarters of nursing home operators said they will change wage rates. Altogether, Medicare payment reductions could results in at least 20, 000 layoffs industry-wide.
Cuts to Provider Payments
According to MedicareNewsGroup, the cuts will be applied to provider payments for services administered under Medicare Hospital Insurance (Part A) and Medicare Medical Insurance (Part B) and contractual payments to Medicare Advantage Plans (Part C) and Medicare Prescription Drug Plans (Part D), according to the CBO.
Low-income subsidies and additional subsidies for beneficiaries whose spending exceeds catastrophic levels in Part D are exempt from sequestration. The sequestration percentage is capped at 2% for payments for individual services under Parts A and B and for monthly contractual payments to Part C and Part D providers.
Other mandatory program spending for benefits and administrative costs are subject to the same reduction rate as non-exempt mandatory spending, according to the CBO.
That means, reports the NewsGroup, that about 90% of Medicare spending is limited to 2% in cuts and 8% is completely exempt from sequestration. The remaining 2% of Medicare spending would be subject to a 7.6% cut in 2013 because it falls under non-exempt nondefense mandatory programs, according to the White House Office of Management and Budget (OMB).
$11 Billion Cuts in 2013
Under the sequestration process, Medicare providers will consequently see $11.085 billion in reimbursement cuts in 2013, according to preliminary OMB estimates. The CBO estimates that Medicare budgetary reductions will total $123 billion from 2013 to 2021.
The CBO also predicts that the sequestration will generate about $31 billion in outlays between 2013 to 2021 as a result of reductions in Medicare Part B premiums and other changes in spending. Since Part B premiums are set to cover a fraction of the program’s cost, the CBO estimates that receipts from premiums will decrease due to reductions in budgetary resources and subsequent lower program costs.
In a letter to Congress sent September 12, 2012, the American Medical Association and more than 100 other provider lobbying organizations wrote, “The combination of the sequestration cut and looming Medicare Sustainable Growth Rate (SGR) payment cut would not only impede improvements to our health care system, it could lead to serious access to care issues for Medicare patients as well as employment reductions in medical practices.”
