F eder al U pdate. E lizabeth L ively, V ice Pr esident Gover nment & E xter nal Affair s. December 15, 20 11

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1 F eder al U pdate E lizabeth L ively, V ice Pr esident Gover nment & E xter nal Affair s December 15, /15/2011

2 Supercommittee On August 2 nd, Congress approved and President Barack Obama signed into law the Budget Control Act of 2011, which established a 12-member, bipartisan congressional committee that would recommend a minimum of $1.2 trillion in additional deficit reductions. The committee is known as the Joint Select Committee on Deficit Reduction, or supercommittee. Implements an automatic across-the-board $1.2 trillion spending cut if Congress fails to enact spending cuts on its own or send a balanced budget amendment (BBA) to the states before the end of the year. 2

3 Members of the Supercommittee Democrats Senate members Patty Murray, Washington Co-Chair Max Baucus, Montana John Kerry, Massachusetts Republicans Jon Kyl, Arizona Rob Portman, Ohio Pat Toomey, Pennsylvania House members Xavier Becerra, California Jim Clyburn, South Carolina Chris Van Hollen, Maryland Jeb Hensarling, Texas Co-Chair Fred Upton, Michigan Dave Camp, Michigan 3

4 Sequestration as a Potential Motivator Under sequestration, Medicare payments to health care providers would be cut by 2% over nine years ( ), which would be on top of the 6% in Medicare cuts already enacted by the health care reform law. Medicaid protected. Automatic cuts to defense spending would be 9%. 4

5 Supercommittee Challenges Timeframe Election

6 Cloudy Outlook The Supercommittee recently conceded defeat. As a result, an automatic $1.2 trillion across-the-board spending cut, split between defense and domestic programs, will take effect in Despite a presidential veto threat, lawmakers are looking for ways to dismantle the trigger, known as sequestration. 6

7 How are Hospitals at Risk? Under sequestration: Medicare payments to health care providers will be cut 2% over nine years starting in January 2013 an estimated $43 billion in hospital payment cuts alone, $123 billion in Medicare overall. Hospitals in the metropolitan Chicago region would see an estimated $1.2 billion over nine years in Medicare payment reductions. 7

8 Shared Sacrifice These cuts come on top of the $155 billion in reimbursement reductions hospitals have already absorbed contained in last year s health care reform law, as well as state Medicaid cuts of $500 million resulting from Illinois dire fiscal situation. 8

9 Other Hospital Risks Congress has a laundry list of items impacting hospitals to consider before the legislative session ends, including: Extending the Section 508 hospital wage index reclassification program. Ensuring reimbursement for the technical component (TC) of certain physician pathology services provided to hospital patients. Tackling the flawed formula used to calculate Medicare payment to physicians. 9

10 Physician Payment Fix Lawmakers will decide whether to prevent a 27% cut in Medicare reimbursement to physicians beginning January 1, The cost to prevent that payment cut is $21 billion for one year and $38 billion for two years. To offset this amount, Congress may consider a number of options, including reducing hospital payments. Cuts of this magnitude are unsustainable, further threatening beneficiaries access to vital hospital services. 10

11 House GOP Plan The proposal includes: A 2-year Sustainable Growth Formula (SGR) fix that would increase physician payments by 1% for 2013 and 2014 with the following offsets: $13.4 billion over 10 years from recapturing the health-reform law's insurance-exchange subsidies $8 billion from cuts to the prevention fund $6.8 billion from outpatient Evaluation and Management (E/M) services $10.6 billion in hospital bad debt $4.1 billion in disproportionate share hospital (DSH) payments The bill also includes the following Medicare extenders: Therapy caps for 2 years An ambulance add-on 1-year geographic practice cost index work extension 11

12 Regardless of what Congress decides before the legislative session ends The Obama administration and Congress will continue to face significant budget pressures driven largely by the lagging economy and an already-record federal deficit. Hospitals and providers remain at risk! A Balanced Budget Act II is possible. Medicare and Medicaid cuts are likely to remain on the table for the foreseeable future, along with issues related to cost, quality and safety. Unknown outcome for Election MCHC will continue to build support within our congressional delegation to protect and enhance, where possible, federal funding for Medicare, Medicaid and other programs. 12

13 U.S. Supreme Court & ACA The U.S. Supreme Court announced that it will review the challenge to the Patient Protection and Affordable Care Act (ACA) brought by 26 states and the National Federation of Independent Businesses (NFIB). Briefing Schedule January 6, 2012: 1 st Brief Deadline March 13, 2012: Reply Brief Deadline Arguments are expected to be heard by the end of March 2012 with a final decision issued by the summer of

14 How Can You Get Involved in MCHC s Advocacy Efforts? Visit MCHC s Web site ( to participate in our online advocacy efforts by utilizing MCHC's online grassroots advocacy tool. 14

15 How Can You Get Involved in MCHC s Advocacy Efforts? (cont.) Visit The Web site hosts an online video that outlines the significant things hospitals do for their communities while addressing critical issues facing hospitals. 15

16 Contact Information Elizabeth Lively Vice President Government & External Affairs (312)