Sequestration's 2% Medicare cuts loom over physicians

As it looks increasingly likely that Congress won't reach a deal this week to head off broad cuts known as "sequestration" to federal programs, physicians should begin preparing themselves for across-the-board 2% reductions to Medicare reimbursement.

The Medicare cuts, which would take effect April 1, are by far the most visible effect of sequestration to physicians. Other key federal healthcare-related programs that include medical research and graduate medical education are also sitting under the sequestration guillotine, however.

The automatic budget reductions amount to between $10.7 billion and $16.4 billion in annual cuts to Medicare and will lead to 496,000 jobs being eliminated in 2013 and a loss of 766,000 jobs by 2021, according to a report last year by research firm Tripp Umbach, American Medical News reported.

Physician offices would suffer 62,000 of those job losses through 2021 as a result of hiring freezes, layoffs, holds on capital projects, and delays in other practice investments, the report said.

Though most of the $85 billion in cuts associated with the sequester are set to take effect March 1, the Medicare cuts wouldn't happen until April 1, due to "a quirk of the sequester's rules," Modern Healthcare reported.

Nonetheless, hospital and physician groups remain spooked by the Medicare cuts, with one hospital executive calling them "a bigger deal than most casual observers would appreciate."

An alphabet soup of prominent medical groups-the American Medical Association, American Academy of Family Physicians, American College of Physicians (ACP), and the Association of American Medical Colleges (AAMC)-have publicly denounced the cuts, but those pleas appear to have fallen on deaf congressional ears.

"Congress has made no apparent progress in reaching agreement on a plan to prevent devastating cuts in essential health programs," said the ACP's Bob Doherty last week in the group's State of the Nation's Healthcare address. "Cuts that will endanger the safety of our food and drugs, curtail medical research, make us less prepared for pandemics and other potential disasters, lead to massive job losses, and reduce patient access to care."

Sequestration would have "wide-ranging implications" for academic medicine, with the National Institutes of Health (NIH), the National Health Service Corps, and several other programs facing mandatory cuts, the AAMC warned late last year.

The NIH, for example, would face budget cuts of $2.5 billion, a reduction in funding that could translate to about 2,300 fewer grants in fiscal 2013, the agency has warned. The NIH's budget 2013 budget was proposed at $31 billion by President Obama earlier this month.

“This will put a gaping hole in the [research] pipeline that will not just slow things down for a while," Curt Civin, associate dean for research at the University of Maryland School of Medicine, told the AAMC. "The leaks will be so great, and the time necessary to rebuild and patch the pipeline will really set the American science and the pharmaceutical industry back."

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