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Potential Medicare payment cuts alarm doctors, hospitals

By Tracy Jan and Theo Emery
Globe Staff / August 3, 2011

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WASHINGTON - Fourteen years ago, Congress passed a bill cutting Medicare payments to doctors in a move to reduce the federal deficit. But every year since, lawmakers have caved to pressure from doctors and held off the cuts, demonstrating the lobbying power of a profession that is once again in the crosshairs of congressional budget-cutters.

Slashes to Medicare payments to doctors and hospitals are among the automatic cuts - along with deep slices from the Pentagon budget - that will occur in December if Congress does not accept $1.5 trillion in deficit reduction proposals from a bipartisan committee that will be free to propose tax hikes or cuts in Social Security. If those choices are a rock, the history of the 1997 law shows that reducing Medicare payments to doctors is a hard place.

Lobbyists for doctors and hospitals are sounding alarms, asserting that the cuts, which politicians claim will not affect Medicare beneficiaries, would harm patients by affecting their access to and quality of care.

“This is a very serious problem for us,’’ said Dr. Lynda Young, president of the Massachusetts Medical Society. “Obviously we recognize the need for cost cutting, but the depth of the projected cuts is really going to have a serious impact on access. Physicians are going to say, ‘We can’t take any new Medicare patients because we just can’t survive.’ ’’

Cuts to Medicare would be capped at 2 percent of current Medicare spending, or roughly $11 billion a year for a 10-year savings of approximately $130 billion, said Eric Zimmerman, a Washington attorney and lobbyist for the hospital industry. Details of how the cuts would be carried out remain to be seen, but Zimmerman says it could mean a flat 2 percent reduction in payments to Medicare providers, including doctors, hospitals, nursing homes, and private insurers that offer plans with Medicare benefits.

“There will be a lot of hand wringing and anxiety over the next four months as we work through this process,’’ said Zimmerman, a Medicare specialist and partner with McDermott Will & Emery. “Health care providers right now are trying to weigh whether they would be better or worse off with the [automatic] cuts or whatever the committee recommends.’’

And even though physicians have managed to stave off deep cuts in the past, jittery health care providers say they feel under attack once again. Doctors already face a 30 percent cut in January to their Medicare payments, said Young, though she acknowledged that in the past, Congress has always managed to fend off the cuts at the 11th hour.

Hospitals, too, are frustrated and feel squeezed, Zimmerman said, because they feel they have already “given their pound of flesh’’ by accepting Medicare reimbursement reductions as part of the health care overhaul.

“To be sure, the lobby that represents the various health care stakeholders is already hard at work trying to defend their constituents’ interests,’’ he said. “Once the committee members get named, their phones will be ringing off the hook.’’

Health insurers are concerned about the specter of automatic Medicare cuts as well. If doctors and hospitals’ Medicare reimbursements are cut, they will probably shift the cost onto private insurers, which will in turn pass it on to patients, said James Roosevelt, chief executive of Tufts Health Plan.

“That cost shift is a way for the federal government to raise taxes without saying so,’’ Roosevelt said. “Ultimately that hits both the consumers and employers and can have a negative impact on jobs.’’

Senator John F. Kerry said Massachusetts hospital executives whom he spoke with yesterday following the Senate vote seemed grateful that they came out of the first round of debt ceiling negotiations unscathed.

“For the moment, they feel we’ve been able to win a reprieve on some level,’’ he said. But “the fight on health care isn’t over.’’

The defense industry and its backers in Congress will also resist the automatic cuts. The Senate Republican whip, Jon Kyl of Arizona, said the Pentagon reductions in the agreement threaten the nation’s military strength. Yesterday, he decried the reductions on the Senate floor before voting for the bill, saying they were “so large, so unimaginable, so irresponsible’’ that Congress would have to approve the committee recommendations.

“The phrase Armageddon was used to characterize this scheme. Can you imagine anything more irresponsible for the commander in chief of the military to promote - not just promote, but insist on - the knowing destruction of the US military as a means to threaten Congress?’’ he said.

Scott P. Brown, the Massachusetts Republican who sits on the Senate Armed Services Committee, said that Massachusetts defense firms could actually have an edge if the automatic defense cuts are imposed.

“We have an incredible amount of ingenuity and brainpower in a strong defense industry,’’ he said. “We’re going to be competing in an open market with other parts of the country, and that gives us a tactical advantage because we’re that much better.’’

Tracy Jan can be reached at tjan@globe.com. Theo Emery can be reached at temery@globe.com.