Fiscal Standoff Could Cause Financial Pain for Health Care

Hospitals, physicians and researchers brace for fallout from mandated spending cuts

HealthDay SHARE

Henry Aaron, a senior fellow at the Brookings Institution, in Washington, D.C., agrees. "Hospital margins are typically quite small and with some exceptions, there will be some institutions so close to the edge already this will put them in a state of crisis."

Physicians

Doctors would be reimbursed at 98 cents on the dollar for their services to Medicare beneficiaries if the cuts go through. While that may sound like a small reduction in payment, Dr. Jeremy Lazarus, president of the American Medical Association, is worried.

"Since 2001, Medicare payments for physician services have only increased by 4 percent, while the cost of caring for patients has increased by more than 20 percent. A 2 percent cut would only widen this already enormous gap between what Medicare pays and the cost of providing care to seniors," said Lazarus, a private-practice psychiatrist in Denver.

Aaron framed the problem facing physicians who treat Medicare patients in simple terms.

"A doctor's income is the difference between expense and revenue," he said. "If you're running an office with expensive equipment that you're making payments on, and a large staff to whom you have obligations, you feel the impact."

Research

The U.S. National Institutes of Health, the National Science Foundation, the FDA and the CDC represent only a fraction of the total research effort in the United States. But the mandated cuts to these agencies could lead to potential delays in research funding and slowdowns in particular projects at critical junctures, according to Dr. Francis Collins, director of the NIH.

In a conference call with reporters, Collins said the cuts could affect areas of research that include cancer, Alzheimer's disease, a universal influenza vaccine that would cover all flu strains, and the brain activity map mentioned by Obama in his State of the Union speech this month.

Collins anticipates some negative consequences to work being done at the NIH. He said it would be difficult to apply 5.1 percent cuts -- or $1.56 billion -- to the seven months left in this fiscal year. "Science is best supported in the circumstances in which you have a stable trajectory where you can plan month to month," he said. "It's a time of extraordinary scientific progress and extraordinary debt."

Antos, of the American Enterprise Institute, said consumers shouldn't worry that scientific research will stop immediately due to relatively small trims to a federally supported research agency such as the NIH: "There is plenty that is not financed by the federal government alone. Remember that the NIH sponsors somewhat theoretical [long-term] research. They're still going to run with the projects they've got going."

Still, Mary Woolley, president and CEO of Research!America, a Washington, D.C., nonprofit group that supports medical and scientific research, thinks research needs to be given a much higher public priority. "Those that feel that [the budget cuts] are just a paper cut are misinformed. It's a serious self-inflicted wound," she said. "If we don't continue to robustly fund the research and evidence base that will help us get a handle on escalating health-care costs, we could bankrupt the nation."

Woolley said Congress has to start focusing on big-ticket items such as Medicare and Medicaid that have a huge impact on health care. "The sequester is a side show compared to what really needs to happen: tax reform and entitlement reform. People know both of these need work, and they're hard, but that's the job [our representatives] are elected to work on," she said.

More information

For more information about health-care costs, visit the Kaiser Family Foundation.

Copyright © 2012 HealthDay. All rights reserved.