U.S. healthcare cuts minimal, more pain looms
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The breakdown of deficit talks in Congress will exact little pain on the U.S. healthcare industry, but it’s a temporary reprieve from steeper cuts that could be put back on the table in 2013.
The failure of the congressional “super committee” to reach a deal triggers a two percent across-the-board cut to Medicare, the government program that provides coverage to millions of older and disabled Americans.
That translates into about $123 billion over the next decade—far lighter than the $500 billion to $700 billion in cuts that could have hit hospitals, doctors and beneficiaries, as well as insurers, drugmakers and nursing homes, if the panel had reached a deal.
But the writing is on the wall for deep healthcare cuts, as the nation’s population ages and draws on federal benefits.
If nothing changes, Medicare, Medicaid and Social Security will devour 100 percent of all tax revenues by 2047, according to the non-partisan Government Accountability Office.
“Congressional staffers and members have been pretty direct with healthcare industries: If you’re not on the list now, you probably will be later,” said Washington-based financial analyst Ipsita Smolinksi.
For the time being, the automatic cuts slated to begin in 2013 will be little more than a nick for both the health industry and politicians loathe to pull back Americans’ health benefits ahead of elections next year.
“Two percent is not a lot for Medicare to absorb. About all that happens is a few more providers, like doctors and hospitals, stop accepting new Medicare patients,” said Joseph Antos of the conservative American Enterprise Institute.
“It’s light compared to what we’ve seen with really big pieces of deficit reduction legislation in the past, particularly in the 1990s,” he added.
HOSPITALS, DOCTORS HIT BY CUTS
As stipulated, automatic cuts are likely to hit hardest among hospitals, which are the biggest recipients of Medicare payments and account for nearly 50 percent of program spending, federal statistics show.
Hospital company stocks including HCA Holdings and Health Management moved lower with the broader market in trading on Monday.
Doctors suffer a double whammy from the collapse of the super committee. Physicians and clinics receive about 25 percent of Medicare spending.
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