The super committee's failure is somewhat good news for Medicaid funding advocates as the program is exempt from the debt law's sequestration, but state and beneficiary sources warned that cuts could still come into play as lawmakers deal with ways to pay for a Medicare physician payment fix and extension of the payroll tax cut and unemployment benefits. One Medicaid source said the sequestration mechanism is great for Medicaid in the sense that it cannot be directly cut, but, “Medicaid is not an island. It's a huge part of state budgets that has complex interactions with many, many other programs.”
“I certainly don't think the threat is gone,” the source said, adding that one challenge came and went but there are many more hurdles to come. “This isn't over.”
Under the Budget Control Act, programs such as Social Security, Medicaid and the Children's Health Insurance Program are exempt from the trigger that begins to take effect in 2013 if the super committee and Congress failed to pass an agreement. Certain pieces of the health law, such as premium tax credits, are also off the table, yet others are likely to be reduced.
But beyond this year, sources agree that it is likely Congress will attempt to rework the $1.2 trillion in automatic cuts that are slated to take place under sequestration, and Medicaid could come into play then as well. A state source told Inside Health Policy it hard to believe that Congress would go an entire year without tinkering with the sequester, especially because of some lawmakers' opposition to the massive defense cuts that are slated to occur.
“Given that, who knows what they are going to do. I can't imagine that there won't be some changes made before the election,” the source said. “Anything that was ever on any list is still an option to be considered.”
Several health stakeholders had lobbied the super committee to reject Medicaid cuts while the discussions were ongoing, including governors from both parties, Medicaid directors and providers. For example, hospitals and states alike were highly concerned that the lawmakers would impose limits on Medicaid provider taxes -- a tactic that some have described as states gaming the Medicaid system by taxing providers to draw down more federal dollars for their Medicaid programs. When there were unconfirmed reports that a possible Democratic super committee offer reduced cuts to Medicaid, hospitals were pleased because the impact on provider assessments would have been reduced.
Kathleen Stoll, director of health policy for Families USA, said that because of next year's election there will likely not be significant cuts to Medicaid coming out of Congress soon, but the program may be the subject of greater focus in 2013.
She added that while health reform law funding was less in the mix at any point in time during the super committee's discussions, the group is happy to see that funding was not cut.
Sources have said previously that there was a clear intent in the debt limit deal from this summer to protect low-income programs like Medicaid and the health reform law.
However, an analysis by Avalere Health says the future automatic cuts will affect the exchange cost-sharing subsidies -- which are different from the law's premium tax credits -- and sources have previously noted that this along with the $15 billion Prevention and Public Health Fund or exchange grants to states would likely also be reduced. Dick Woodruff, senior director of federal relations for the American Cancer Society Cancer Action Network, added that as long as there is opposition to the reform law by Republicans then those accounts are going to somewhat be in danger.
But Jeff Levy, executive director of Trust for America's Health, told Inside Health Policy that “there are times when no deal is better than a bad deal.” The Prevention and Public Health Fund in the health reform law will do better under sequestration than what was known to have been discussed in the super committee, with Levy saying if the sequester were applied evenly it would result in an 8 percent cut.
That figure is significantly less than the $3.5 billion reduction of the fund that the president proposed in his deficit reduction recommendations and the $8 billion cut that surfaced in a proposal last week by the panel's Democrats.
Nonetheless, Levy added, “It's a long time between now and 2013, and there are many opportunities to get back to rethink this approach in a more comprehensive way, and be a little bit more surgical if cuts are going to be made.” -- Rachana Dixit (This e-mail address is being protected from spambots. You need JavaScript enabled to view it )
