AAOS Now

Published 11/1/2012
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Madeleine Lovette

The Specter of Sequester and Its Impact on Orthopaedic Care

Lame-duck Congress must address fiscal cliff issues

This month, Congress will reconvene for what might be the most daunting “lame-duck” session in history as it tries to prevent a fiscal catastrophe that could drive the country into another recession. One of the most pressing concerns is preventing the implementation of the $1.2 trillion budget sequester, called for under the 2011 Budget Control Act.

The slew of arbitrary cuts to critical federal programs, including Medicare, is a result of the Super Committee’s failure to come up with its own, more prudent budget reduction plan. (See “Super Committee Fails to Reach Deficit Reduction Agreement,” AAOS Now, January 2012.) If Congress is unable to reach a deal to stave off these cuts before January 2, 2013, numerous health programs that are integral to orthopaedic surgeons and their patients would suffer crippling financial blows.

Cuts to Medicare
In September, the Office of Management and Budget (OMB) sent a report to Congress detailing which federal programs would be impacted by the sequester for fiscal year 2013. According to the report, $11 billion in mandatory and discretionary spending would be cut from the Medicare program. Because the sequester is prohibited from affecting Medicare benefits, hospitals and providers will be forced to assume the brunt of this financial burden.

Perhaps most worrisome for orthopaedic surgeons is the 2 percent reduction to Medicare reimbursements included in the $11 billion decrease. Not only would a 2 percent payment reduction be problematic, its impact would be compounded if a solution to the Sustainable Growth Rate formula (SGR) is not achieved. That would mean that combined SGR and sequestration cuts of 29 percent would go into effect on Jan. 1, 2013.

Cuts of this magnitude would have a devastating impact on private practices and patient access to care and would certainly undermine efforts to achieve broader, long-term reforms to the Medicare program. According to the national consulting firm, Tripp Umbach, the sequesters’ Medicare spending cuts would decimate the healthcare workforce, costing more than 766,000 healthcare and related jobs by 2021. In part, this is due to significant reductions in staffing by physicians and hospitals to offset the reductions in reimbursements.

The sequester would also cut $78 million in programs used to fight Medicare fraud and abuse, which would threaten patient safety and permit wasteful spending in an already fiscally unsound program.

Cuts to other programs
Funding for the Peer-Reviewed Orthopaedic Research Program (PRORP), which conducts groundbreaking research in limb salvage and treatment of wounded military personnel, would also be jeopardized by the sequester. The BCA calls for $3.2 billion in cuts to the Defense Health Program, which includes the PRORP.

Current and future musculoskeletal research being performed at the National Institutes of Health (NIH) would also be impacted by a devastating $2.5 billion cut to the agency. According to NIH director, Francis S. Collins, MD, PhD, the sequestration would “disrupt and do serious damage to the progress that we now see” in all areas of research.

Lastly, the sequestration would reduce spending for programs created under the Affordable Care Act, including funding for grants to help states establish health insurance exchanges and for prevention and public health funds. Funding for the Independent Payment Advisory Board, however, is exempted from sequestration cuts.

Avoiding the Trigger
According to the OMB report, the sequestration itself was never intended to be implemented. Rather, it was intended to force both parties to compromise on an alternative, more targeted and reasonable proposal to cut the deficit. Although Congress still has an opportunity to strike a deal, both parties seem reluctant to make the concessions necessary to do so—most Republicans refuse to raise taxes and most Democrats refuse to overhaul entitlement programs like Medicare and Medicaid.

Although the administration strongly believes that sequestration is bad policy, President Obama has promised to veto any plan that does not include a combination of budget cuts and revenue raisers. Despite these seemingly insurmountable obstacles, legislators are convinced that there will be some form of intervening legislation passed to prevent the sequester.

One proposal being circulated in Congress, nicknamed “Sequester 2.0,” involves mandating the House and Senate tax-writing committees to rewrite the Tax Code during the lame-duck Congress. A failure to rewrite the Tax Code would trigger additional automatic cuts and an overhaul of tax and spending laws.

Another proposal being considered includes passage of a short-term deficit deal and a mandate to House and Senate committees to produce a long-term deal. The failure to reach a deal would trigger automatic cuts to programs under the assigned committees’ jurisdictions.

To many in Congress, however, these plans look too similar to the very legislation responsible for the pecuniary pickle they are trying to prevent. Rumors are circulating about a bipartisan Senate coalition working on a plan, but if the plan raises taxes, obtaining the support of House Republicans will be difficult.

AAOS Advocacy
The American Association of Orthopaedic Surgeons (AAOS) is working both independently and with coalitions to educate Congress about the devastating impact the sequestration would have on patients and their doctors and has taken the following steps:

  • The AAOS, along with more than 100 state and specialty medical societies, sent a letter to Congress detailing the harmful effects that the sequester–mandated Medicare reimbursement cuts would have on patient access.
  • In October, the AAOS Council on Advocacy met with House and Senate leadership to urge the passage of nullifying legislation to prevent the sequester cuts to Medicare and other vital health programs.
  • Two additional member fly-ins have been scheduled to lobby Congress on the sequester and other impending issues such as the SGR.
  • AAOS staff in the office of government relations persistently lobby on these issues during regularly scheduled Hill visits.

Continue to watch AAOS Headline News Now, AAOS Advocacy Now, AAOS Now, and member alerts from the leadership to learn more about these issues and what AAOS members can do to effect change.

Madeleine Lovette is the communications specialist in the AAOS office of government relations; she can be reached at lovette@aaos.org