Medicare Cuts Looming

Medicare Cuts Looming

There are significant cuts in Medicare spending that will take place unless Congress takes action before the end of this year. Below is an explanation of why these cuts could come. We realize it is a bit complicated, but we think you should know what could happen because if cuts are made, they may severely impact the healthcare of some, or all seniors.

Health care providers could be facing a significant reduction in Medicare payments if Congress fails to pass legislation to avert these decreases by the end of the year. These looming cuts are the result of several policies that have a combined effect of reducing Medicare payments by as much as 9%.

The first of these policies is the 2% Medicare Sequestration reduction. These are the result of a law passed in 2010 meant to help reduce the federal deficit. Any year that spending on certain government programs increases the federal deficit, cuts in the spending of that program must be made.

Congress paused sequestration cuts in 2020 and 2021 due to the COVID-19 pandemic but began phasing them in again in 2022. Sequestration resumed with a 1% reduction during the second quarter of the year and fully resumed a 2% reduction on July 1.

The second of these cuts is a 4% reduction associated with the American Rescue Plan Act (ARPA) of 2021. ARPA provided $1.9 trillion in economic relief for the COVID-19 pandemic. When passing this bill, Congress failed to include a waiver of the statutory “PAYGO” requirement to offset the cost of legislation that adds to the federal budget deficit.

As a result, cuts required by law were automatically set to take effect in 2022, including a 4% Medicare reduction. While Congress ultimately passed legislation that prevented this cut from taking effect in 2022, it did so by delaying the cut until 2023. This means that Congress must pass new legislation that either fully waives cuts for the American Rescue Plan Act or pass another delay for implementation.

The last reason for the looming cuts is the most complicated and we will not even try to explain, except to say that there will be a cut in payments to some medical specialties if Congress does not act.

Between the resumption of the 2% sequestration cut, the prospect of a 4% PAYGO cut, and the expiration of the 3% physician payment increase, providers are looking at a 9% reduction in Medicare payments in 2023 compared to 2022 without Congressional action.

TSCL opposes these cuts, and we will be watching carefully when Congress returns to work next month and do all we can to prevent them.