Cuts to Health Programs, Other Areas Expected To Take Effect Tomorrow

Lawmakers and congressional aides say they are confident that the mandated spending cuts under sequestration will take effect Friday, adding that negotiations to offset or replace those cuts could continue for several months, The Hill reports (Bolton, The Hill, 2/28).

The mandated cuts involve nearly $1 trillion in across-the-board reductions, including a 2% reduction to Medicare reimbursement rates. In January, President Obama signed legislation -- negotiated by Vice President Biden and Senate Minority Leader Mitch McConnell (R-Ky.) -- that delayed the cuts until March 1 (California Healthline, 2/27).

Sequester Expected To Take Effect Friday

According to The Hill, there has been growing speculation among lawmakers that the sequester would go into effect on Friday as scheduled but that it would be quickly addressed in a March deal to keep the government funded. However, Obama has suggested he would prefer to handle the sequester separately, according to Senate Democratic aides.

The Obama administration is hoping that a public outcry over the sequester will force GOP leaders to make concessions and reach a deal shortly after the cuts take effect, but policy experts say a public response is unlikely because individuals will not experience direct effects of the cuts for several weeks or months.

Sen. Richard Burr (R-N.C.) also predicted that the sequester would remain in place through the end of the year, saying he could "promise" that Congress would not "roll back" the size of the cuts (The Hill, 2/28).

Obama To Meet With Congressional Leaders About Sequester

On Friday, Obama is scheduled to meet with Democratic and Republican leaders hours after the sequester officially takes effect to discuss ways to reduce government spending, the AP/Sacramento Bee reports (Lederman, AP/Sacramento Bee, 2/27).

The meeting would be the first time this year that Obama and Democratic leaders have sat down with House Speaker John Boehner (R-Ohio) and McConnell to discuss the issue.

During the meeting, Obama is expected to push Boehner and McConnell to accept higher tax revenue as part of a balanced deficit-reduction deal (Goldfarb/Berman, Washington Post, 2/27).

However, McConnell in a statement said, "The meeting Friday is an opportunity for us to visit with the president about how we can all keep our commitment to reduce Washington spending." He added, "But one thing Americans simply will not accept is another tax increase to replace spending reductions we already agreed to" (Mason/Holland, Reuters, 2/27).

Health Care Industry Faces Cuts Under Sequester

On Friday, HHS is expected to send general notifications about the agency's expected $15.5 billion reduction in overall spending under sequestration to departments and health organizations that rely on federal funding, an HHS spokesperson said, the Los Angeles Times reports. HHS will follow up with more specific instructions on how the cuts will be implemented (Levey, Los Angeles Times, 2/27).

Meanwhile, Medicare providers can expect to see the 2% cuts in their Medicare reimbursements around mid-April, according to Modern Healthcare (Daly/Zigmond, Modern Healthcare, 2/27).

Public health and medical research programs could face significantly higher reductions, jeopardizing several recent initiatives to strengthen the nation's mental health system and prevent and respond to outbreaks of food-borne illness (Los Angeles Times, 2/27).

The cuts would also force research laboratories at major universities and medical centers to shut down (Vuori/Hunter, U-T San Diego, 2/27).

Other health care cuts under sequestration include:

• A $210 million budget reduction to FDA (Viebeck, "Healthwatch," The Hill, 2/27).
• A $25 million reduction in discretionary spending and $53 million reduction in mandatory spending to federal programs fighting Medicare fraud and abuse (Ethridge, CQ Roll Call, 2/27);
• A $1.6 billion budget reduction to NIH (Los Angeles Times, 2/27); and
• The military furloughing thousands of civilian medical workers, which could raise health care costs by forcing military members to go to more costly private doctors (Zoroya, USA Today, 2/27).

McConnell, House Democrats Offer New Deficit-Reduction Plans

On Wednesday, McConnell introduced the Republican alternative (SB 16) to sequestration that would give the Office of Management and Budget more flexibility to implement spending reductions to reduce their effect on vital government programs, The Hill's "Floor Action Blog" reports.

The proposal -- by Sens. James Inhofe (R-Okla.) and Pat Toomey (R-Pa.) -- prohibits any tax increases and ensures that no more than half of the $85 billion in mandated spending cuts would come from the Department of Defense.

The Senate is scheduled to vote Thursday on the Republican plan and a Democratic plan (SB 338) to avert the sequester, but neither is expected to pass (Cox, "Floor Action Blog," The Hill, 2/27).

Meanwhile, Rep. Adam Smith (D-Wash.) has proposed another alternative solution to reduce the federal deficit that would eliminate the mandated spending cuts, while reducing the government's budget by $300 billion. The bill -- which has no co-sponsors -- calls for cutting $153 billion in domestic spending over the next eight years (Lardner, AP/Sacramento Bee, 2/27).

Health Care Providers Not Concerned About 2% Cut to Medicare Reimbursement Rates

Although health care providers face a 2% reduction in Medicare reimbursement rates under sequestration, the group remains unconcerned because of the relatively small size of the cut, National Journal reports (Sanger-Katz, National Journal, 2/27).

Further, the estimated $100 billion in reductions to Medicare spending under the sequester are significantly less than proposals put forth by Obama and Republicans during the fiscal cliff debate, according to the AP/Sacramento Bee.

Dan Mendelson -- president of Avalere Health -- said, "The health care industry fears the alternative more than they fear a predictable reduction in rates." He added, "They just do not want to roll the dice. That is why you do not hear as much of an outcry on Medicare" (Alonso-Zaldivar, AP/Sacramento Bee, 2/27).