The Debt Ceiling Deal: Implications for South Carolina’s Hospitals

1. The Debt Ceiling Deal: Implications for South Carolina’s Hospitals

2. Just in time to comply with an August 2nd deadline, Congressional leaders struck a deal to raise the debt ceiling and President Obama announced he would sign it. The deal will have a financial impact on hospitals, though the specific impact has yet to be determined. Whew!

3. What do we know? • The deal paved way for a $900 Billion increase in the debt ceiling, deferring the crisis for a year or so. • Federal spending was immediately cut $917 Billion, but Medicare and Medicaid were not affected. • More cuts will be required, so Congress appointed a committee to propose additional spending reductions. • If the committee’s recommendations are not approved by Congress in December 2011, federal spending will be cut automatically by $1.2 Trillion.

4. The Committee’s charge is to propose $1.5 Trillion in deficit reductions over 10 years. The Committee’s plan is due to Congress November 23rd. Congress must accept or reject the Committee’s plan by December 23rd. (Note: Jim Clyburn of SC is on the Committee.) The Joint Select Committee on Deficit Reduction

5. What happens if Congress rejects the Committee’s proposed reductions? • If Congress rejects the Committee’s plan, spending will automatically be cut by $1.2 Trillion over 10 years. • Defense spending will be hit hardest, followed by Medicare. • Medicare providers and insurers will be cut 2% across the board. • Medicaid will not be cut. • No new revenues will be generated by this default option. (No new taxes.)

6. Do we know what kind of cuts the Committee is likely to propose? The recent debt ceiling debate gave us some clues. Negotiators were considering the following: • Medicare Providers: Disallow bad debt from hospital cost reports; reduce IME payments for teaching hospitals; reduce rural hospital adjustments; cut funding for post acute care services; increase IPPS coding offsets; expand authority of IPAB. • Medicare Beneficiaries: Increase the Medicare eligibility age; adopt means testing; increase co-pays for Medicare Parts A & B, home health, and skilled nursing care. • Medicaid: Eliminate or cap provider taxes; adopt blended FMAP rates to reduce variation among state matching rates (this would probably hurt poor states like SC).

7. Who might prefer the automatic cuts? • Seniors (AARP) probably won’t support means testing or increasing the age to qualify for Medicare. • Anti-tax groups will probably oppose the Select Committee’s plan if it includes new revenues. • Hospitals might oppose the Select Committee’s plan if it includes more painful cuts than a 2% reduction in Medicare rates.

8. What would YOU choose? • If hospitals want to influence the outcome in Washington, we have two choices: • Take a 2% cut in Medicare rates, or • Let Congress open a Pandora’s Box of changes to Medicare and Medicaid.

9. How should SC hospitals prepare? • We should get comfortable with uncertainty. Declining federal and state budgets, the possible repeal of the Affordable Care Act, and debates over entitlement reform will perpetuate this uncertainty for next few years. • We should stay fully informed and be prepared to communicate with our members of Congress. • We must reengineer the way care is delivered to increase quality and reduce cost.

10. Dealing with uncertainty • In the face of uncertainty, we should focus on our primary duty: delivering the best possible care to each patient, every time. • We can’t control what happens in DC, but we can control what happens in our hospitals. That’s why SC hospitals have focused on reengineering the way we deliver care. • We’ve made great strides in heart attack care, infection rates and surgical safety. And we’re going to do much more.

11. Our Reengineering Platform: The Triple Aim Population Health Healthy SC Experience of Care Per Capita Cost 11

12. Keys to a Healthy South Carolina Health care must become highly reliable. Patients must be more engaged. We must deliver compassionate and patient-centered care at the end of life. We must improve health status and reduce health disparities. We must improve efficiency and reduce waste. We must improve coordination of care. Payment models must be reformed and aligned.

13. The Debt Ceiling Deal: Implications for South Carolina’s Hospitals