Fiscal Cliff, Deals To Avoid It Worry Health Advocates

While they’re concerned about what might happen if the country goes off a fiscal cliff, some California health care advocates worry more about bargains that might be struck to prevent the plunge.

“We’re actually more concerned about what might be in the deal to avoid it,” said Anthony Wright, executive director of Health Access California.

“There are definitely some problematic things that happen under the sequestration agreement, but things could get a lot worse if the wrong deals are made. Right now, Medicaid is not part of the equation, but either now, with the sequestration deals on the table or very soon next year when Congress takes up the debt ceiling issue again, Medicaid could become a big part of the discussion. When that happens, we start to get very worried,” Wright said.

Betsy Imholz, Consumers Union health care expert in California, agreed, adding there also might be cause for concern over parts of the Affordable Care Act.

“For the most part, Medicaid and most parts of the reform law are protected in the current sequestration agreement,” Imholz said. “But we keep hearing that entitlements will get put on the table, as well as maybe parts of the ACA. Will they become trading pieces in this game to avert sequestration? That’s a very realistic fear, maybe more so than sequestration.”

Sequestration’s Effects in Health Care

The potential effects of sequestration on California’s health care system are hard to measure as a whole, but according to a few predictions about specific parts, the effects could be significant.

According to an analysis from the American Hospital Association, 500,000 health care jobs would be eliminated nationwide within a year and another 266,000 would be gone by 2021 if sequestration takes effect. Job losses would hit hardest in California, Florida and Texas, according to AHA. Most of the jobs would disappear from hospitals, followed by nursing facilities, physician offices and medical laboratories.

According to a study from George Mason University, California will lose more than 225,000 jobs in the first year — about 135,000 of them related to the defense industry and about 90,000 unrelated to defense, including health care. Overall, in the first year after the country goes over the fiscal cliff, California’s gross state product will drop by $22.7 billion and wage earners will bring home about $11.5 billion less in pay, according to the study.

In addition to job losses and a decline in the state economy, many government-funded health care efforts — ranging from county-run substance abuse programs to Meals on Wheels — could see funding reduced.

The word “sequestration” has intersecting, layered meanings in medical and legal terminology. In the medical world, it generally refers to abnormal detaching of a part from the whole. In legal terms, it means seizing of property to appease creditors.

Both meanings have some resonance in connection to the national budget. Sequestration is the end product of Congress’ failure to reach agreement to reduce the national debt. After a super committee’s recommendations were shelved last year, the country began marching toward a fiscal cliff of spending cuts and tax increases that will remove $560 billion from the economy next year and threaten to send the country into another recession.

A White House Office of Management and Budget report detailed how sequestration would work in various parts of the economy — including health care. Starting in January, health care providers — hospitals, physicians and others who care for Medicare beneficiaries would be reimbursed 2% less than they are now. The reduction will total more than $11 billion nationwide in the first year. Over the next decade, reductions in Medicare reimbursements could total $120 billion, according to the OMB report.

Health care research also could take a significant hit. Under sequestration, NIH could lose $2.8 billion and would fund 25% fewer grants. The National Science Foundation could lose nearly $600 million.

Several health care programs are exempt from sequestration, according to two reports from the Congressional Research Service delivered to members of Congress last month. The Children’s Health Insurance Program, community and migrant health centers, Indian health services and facilities are all exempt, according to the Congressional Research Service.

Health Advocates Urge Democrats To Stand Firm

When national budget talk turns to health care programs this month and early next year, Wright said, “We think Democrats should hold the line strongly on protecting Medicare and Medicaid.”

“Our best argument is that we had this debate in the election and our side won,” Wright said.

“President Obama and Gov. Romney made it very clear that there was a distinct difference between their two points of view. Obama said there was a need to raise revenues as part of the solution and Romney chose Paul Ryan, author of a fairly draconian budget plan, as his running mate. We saw what happened. Voters said they want to protect these core programs like Medicaid and Medicare.”

California’s biomedical industry and scientific communities are urging Congress to protect their funding.

Last month, the California Healthcare Institute sent a letter to Congressional leaders warning of “dire consequences science funding cuts would have for the biomedical sector in California and across the country.”

The letter from biomedical industry leaders and academics said California is the worldwide leader in biomedical investment, research and development, with more than 2,300 biomedical companies and public and private research institutions advancing scientific knowledge and developing new tools, treatments and technologies.

The letter said allowing sequestration cuts could damage an “important engine of economic growth in California,” employing nearly 268,000 workers statewide, paying more than $20 billion in annual wages and accounting for $18.6 billion in exports.