Congress Kicks the Healthcare Can Down the Road

The inability of the Congressional super-committee to achieve consensus on deficit reducing spending cuts means government sponsored healthcare (NYSE:XLV) program Medicare faces an automatic all-encompassing 2% cut in its budgets.

But this is chicken-feed in comparison to the cuts Medicare would have faced had the Committee been able to arrive at agreement. The 2% cut is really about $123 billion over the next ten years versus $500-700 billion in cuts that could have been implemented by the Committee.

“Two percent is not a lot for Medicare to absorb. About all that happens is a few more providers, like doctors and hospitals, stop accepting new Medicare patients,” said Joseph Antos of the conservative American Enterprise Institute. “Its light compared to what we’ve seen with really big pieces of deficit reduction legislation in the past, particularly in the 1990s,” he added.

The automatic cut kicks in during 2013 and is likely to hit hospitals and doctors the hardest. Cuts will also reduce funding for certain insurers that participate in the Medicare Advantage program.

All said and done, Washington simply kicked the can down the road because deeper cuts are inevitable after the 2012 elections. “There is no doubt that this will mean there will be enormous pressure in 2013,” said Ron Pollack of Families USA, a healthcare consumer advocacy group.

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