'Super Committee' Fails to Make Deal; Medicare Cuts Triggered

Medpage Today,

By Emily P. Walker, Washington Correspondent, MedPage Today

Published: November 21, 2011

WASHINGTON -- 

The bipartisan committee tasked with identifying more than a trillion dollars in cuts in federal spending before Thanksgiving announced it will not be able to reach an agreement, triggering automatic cuts of $1.2 trillion from federal spending over 10 years, including an annual 2% cut to Medicare providers.

In a joint statement sent Monday afternoon by the chairs of the so-called "super committee," Sen. Patty Murray (D-Wash.) and Rep. Jeb Hensarling (R-Texas) said they were "deeply disappointed that they couldn't reach a deal in time."

"After months of hard work and intense deliberations, we have come to the conclusion today that it will not be possible to make any bipartisan agreement available to the public before the committee's deadline," they said.

President Obama delivered a short statement from the White House, saying he was disappointed in the committee's failure to reach agreement and that he would veto any bill that would stop the cuts from taking effect.

The panel technically had until the end of Wednesday to vote on a deal, but it was required to present legislative language to the full committee two days before that deadline, which would be today.

The 12-member bipartisan panel was created by a debt deal passed in early August. Panel members were supposed to agree on how to cut at least $1.2 trillion from the federal budget. If they failed to reach a deal, a fail-safe mechanism mandated by the debt bill would automatically cut $1.2 trillion from federal spending.

Now those automatic cuts are a reality. Half of the $1.2 trillion will come from defense spending, but Medicare also will be affected. (However, Medicaid was spared from any cuts by language in the debt bill).

Under the trigger, payments to Medicare providers will be cut 2% across the board, starting in 2013. Medicare beneficiaries, meanwhile, will be shielded from the cuts.

According policy experts who spoke with MedPage Today, the trigger option may actually result in fewer cuts to Medicare than had the committee actually come to a consensus and targeted more specific aspects of the Medicare program to reduce or eliminate.

Josh Gordon, policy director of the Concord Group, a nonpartisan budget watchdog organization, said it's unlikely that Congress will allow 2% cuts in Medicare over every one of the next 10 years.

A 10-year plan forged by a bipartisan committee may have had a little more sticking power and have been politically unpopular to overturn. But a piece of legislation that was essentially automatically triggered as a last resort wouldn't be as difficult to block or change in the future, he said. So, sustained cuts to Medicare may not actually materialize, he said.

David Lipschutz, a policy attorney at the nonpartisan Center for Medicare Advocacy, said that the failure of the super committee is "probably a good thing in the short term. ... However, a lot of the issues that were raised with respect to Medicare will not go away."

One of those issues is the sustainable growth rate (SGR), the formula that determines how much doctors receive for treating Medicare patients. Under the SGR, doctors are scheduled to face a 27% cut in Medicare reimbursement starting Jan. 1 when a short-term patch that has shielded them from cuts is set to expire. 

Doctors' groups have lobbied the super committee to address the SGR issue in its deliberations, to no avail.

Last week, Rep. Allyson Schwartz (D-Pa.) introduced a proposal to repeal the SGR and gradually replace it with a new payment system.

But there isn't much time to debate and pass broad Medicare payment reform legislation, so another last-minute short-term fix for the SGR problem is likely. "They're not going to come up with any real fix at this point," Lipschutz predicted.

The American Medical Association (AMA) issued a statement after the super committee failure was confirmed that said the group was extremely disappointed in the "robotic, across-the-board spending cuts" that will now be triggered.

"The failure of the deficit committee forces our nation to continue on an unsustainable path that puts current and future generations of Americans at risk for harsh consequences," AMA President Peter Carmel said. "The deficit committee had a unique opportunity to stabilize the Medicare program for America's seniors now and for generations to come.

"Once again, Congress failed to stop the annual charade of scheduled Medicare physician payment cuts and short-term patches, which spends more taxpayer money to perpetuate a policy everyone agrees is fatally flawed."

The American College of Physicians said the trigger puts "patients' access to healthcare in grave peril."

The super committee operated mostly behind closed doors, making it difficult to know which potential healthcare cuts it entertained and which were off the table from the start.

Gordon said there was probably one elephant in the room that prevented any real agreements from happening: The Bush-era tax cuts (which were extended until 2012 by President Obama) may have been a huge sticking point, he said.

"Those tax cuts and the fact that they're set to expire, that's a major battleground," Gordon explained. "It's such a point of contention, and it's such a huge amount of money," he said, adding that extending the cuts for another decade would cost about $4 trillion.

"When you have that looming over fiscal policy, it becomes really difficult to talk about doing something without first doing something about those tax cuts," he said.