The Impact of Eliminating Medicare Spending Cuts

As Congress takes a look at the spending decreases and tax increases that will lead the U.S. over a fiscal cliff, one factor that will be considered is the scheduled reductions in the Medicare payment rates for physicians.

According to the Congressional Budget Office (CBO), if the government eliminated the scheduled Medicare payment reduction for 2013, then the country’s deficit will increase by $10 billion in 2013 and $16 billion in 2014. For the last decade, Congress has stopped the cuts to Medicare payment rates.

The CBO wrote (emphasis is the writer’s):

Moreover, if the fiscal tightening was removed and the policies that are currently in effect were kept in place indefinitely, a continued surge in federal debt during the rest of this decade and beyond would raise the risk of a fiscal crisis (in which the government would lose the ability to borrow money at affordable interest rates) and would eventually reduce the nation’s output and income below what would occur if the fiscal tightening was allowed to take place as currently set by law.

Essentially, although the country would benefit in the short term if Congress agreed to eliminate all of the planned spending cuts and extend all of the tax cuts, it would actually be even worse over the long run.

If the Medicare spending cuts occur as planned through the sustainable growth rate (SGR), then the physician fees will be reduce by 27% in 2013, the CBO projected back in August. Furthermore, the SGR cuts would be coupled with a planned 2% sequestration of Medicare spending. A report by the

American Hospital Association, the American Medical Association and the American Nurses Association estimates that

more than 750,000 health care and related jobs could be lost in the next decade because of that additional reduction in Medicare spending

.

The CBO also looked at how eliminating other reductions or extending certain taxes would affect the deficit in 2013. If Congress extended most of the expiring tax provisions and indexed the Alternative Minimum Tax — set to go back to 2000 levels — for inflation, the deficit would increase by $330 billion.