All eyes in Washington are on the approaching Aug. 2 deadline for raising the debt ceiling. Failure to do so would push the U.S. into default on its existing financial obligations, which experts claim would have a catastrophic effect on our economy.
Vice President Joe Biden has been leading talks with leaders from both parties to try to hammer out an agreement that would increase the debt limit while taking significant steps to reduce the deficit through spending cuts and/or tax increases. While specifics have not yet emerged, reductions to Medicare and Medicaid, which comprise more than 20 percent of all federal spending, remain on the table. Given that, on average, the programs account for around 55 percent of hospital revenues, any agreement almost certainly will have significant implications for the hospital field.
Many of the proposals in the mix call for across-the-board spending cuts based on arbitrary caps or targets. The American Hospital Association, AARP, American Medical Association, American College of Cardiology and LeadingAge sought to understand the real-world impact such across-the-board spending cuts in federal programs could have on some of our nation's most vulnerable, including the elderly, children and low-income families.
The groups released a study detailing the potential impact of one such proposal, the Commitment to American Prosperity (CAP) Act. This bill would limit federal spending to about 20.8 percent of Gross Domestic Product and automatically cut spending across all federal programs in any year where spending is projected to exceed the spending cap.
The study, conducted by The Lewin Group, found that under the proposal by 2021:
• 5.1 million individuals would lose their health insurance
• Cuts to hospitals would force most hospitals to operate in the red, jeopardizing access to care
• Dramatic reductions in fees for physician services could lead to fewer physicians participating in Medicare
• Up to 1.3 million health care workers could lose their jobs
• Social Security benefits would be cut by nearly 20 percent
• Cuts to Social Security and other income support programs would force 3.8 million people into poverty - 2.1 million of them seniors, a 45 percent increase
• Cost shifting of federal payment shortfalls to private employers could lead to a nearly 5 percent increase in health insurance premiums
While the CAP Act may not be the final approach brought to a vote, similar consequences could result from any across-the-board measure that sets specific limits on spending.
To read the study, click here.