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What’s this Sequester Mumbo-jumbo? Turns Out, Not Mumbo-jumbo at All.

So you may be asking yourself what’s this budget sequester mumbo-jumbo all about?  Turns out, it’s not mumbo-jumbo at all; rather a pretty serious issue.  As you may recall (or are trying to forget), last year Congress passed the Budget Control Act (BCA) which requires $1.2 trillion in cuts over the next 10 years starting on Jan. 1, 2013.  While certain programs were spared (e.g., Social Security), unless Congress intervenes to prevent them, federal healthcare programs will see significant reductions.  Earlier this summer, Congress also passed the Sequestration Transparency Act, which required President Obama to release a report specifying in detail how these cuts will be made.  The full report (all 400 pages) is available here.

Under the sequester, Medicare spending will bear the brunt of the hit; however, medical research, public health programs and some Affordable Care Act (ACA) initiatives also will experience reductions. Cuts totaling $11.6 billion will affect both mandatory and discretionary spending in Medicare Parts A, B, and the prescription drug program. The report also outlines deep reductions in other healthcare programs, including the National Institutes of Health, which will suffer a $2.5 billion cut. The ACA’s state insurance exchange grants and Prevention and Public Health Fund will be trimmed, as well. The subsidies to help people get coverage in the exchanges — which won’t begin until 2014 — aren’t affected. The cuts will escalate each year, reaching approximately $16.4 billion in 2021.

Here are breakdowns of the main sequester cuts by agency and program:

Centers for Disease Control and Prevention

  • CDC-Wide Activities and Program Support: $464 million (discretionary)

Centers for Medicare and Medicaid Services

  • Medicare — Supplementary Medical Insurance Trust Fund: $5.2 billion ($4.911 billion mandatory, $281 million discretionary) – note that physicians would be cut by 2% each year (this is in addition to any SGR-related cuts (current 27% on Jan. 1)
  • Medicare — Hospital Insurance Trust Fund: $5.8 billion ($5.646 billion mandatory, $179 million discretionary)
  • Medicare — Prescription Drug Account, Supplementary Insurance Trust Fund: $591 million ($559 million mandatory, $32 million discretionary)
  • Prevention and Public Health Fund: $76 million (mandatory)
  • Affordable Insurance Exchange Grants: $66 million (mandatory)
  • Public Health and Social Services Emergency Fund: $47 million (discretionary)
  • Health Care Fraud and Abuse Control Account: $78 million ($53 million mandatory, $25 million discretionary)
  • General Departmental Management: $39 million (discretionary)

Food and Drug Administration

  • Salaries and Expenses: $318 million (discretionary)

Health Resources and Services Administration

  • Health Resources and Services: $575 million ($509 million discretionary, $66 million mandatory)

National Institutes of Health

  • National Institutes of Health Nondefense Function: $2.5 billion ($2.518 billion discretionary, $11 million mandatory)

Indian Health Services

  • Indian Health Services Nondefense Function: $320 million ($317 million discretionary, $3 million mandatory)

Substance Abuse and Mental Health Services Administration 

  • Substance Abuse and Mental Health Services Administration Nondefense Function: $275 million (discretionary)

So with these dollar figures, it’s not hard to see why the American Association of Neurological Surgeons and Congress of Neurological Surgeons joined the AMA and more than 100 state medical and national specialty societies in sending   to Congress urging lawmakers to prevent the two percent Medicare cut required under the BCA as well as the 27 percent SGR-related cut that also will go into effect Jan. 1, 2013.  As we stated in our letter, “The combination of a sequestration cut and looming Medicare SGR payment cut would not only impede improvements to our health care system, it could lead to serious access to care issues for Medicare patients as well as employment reductions in medical practices.”

Clearly, patients and physicians deserve better than the “kick-the-can” approach Congress continues to employ each time we reach the reimbursement cliff and the time for a permanent, workable and sustainable solution is long overdue.  As ever, we are hopeful that Congress will address both of these issues when it convenes the lame duck sessions following the November elections.

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