Sequester Cuts: The Medicare Side of the Ledger

by Heather J Foster, MPH

While we have focused primarily on the impact sequester will have on the Health Centers Program, it’s important to note that this will not be the only way FQHCs are affected by the across the board cuts scheduled for March 1.  We have already blogged about the fact that Medicaid is exempt from the sequester cuts, but it is also important to note that Medicare cuts will likely impact health centers, albeit to a far lesser extent than cuts directly to health centers’ base funding.

You’ll remember that the Budget Control Act established the “Super Committee” on Deficit Reduction and a back-up plan – known as the sequester – that would take effect if the Super Committee was unable to reach a deal.  Part of this back-up plan was to continue the historical precedent of protecting the safety net by exempting cuts to Medicaid and limiting Medicare across-the-board cuts to 2% but with the extra condition that NO cuts would be made to Medicare BENEFICIARIES.  What exactly does this mean?  Well, it means that the brunt of the 2% cuts will then necessarily fall to providers and plans.

While CMS has not yet put out information on how exactly the Medicare cuts will be implemented, a relatively safe bet is that on aggregate 2% of the revenue health centers receive from Medicare will be reduced.  That being said, the impact will be felt quite differently from health center to health center, and felt particularly hard by health centers with 1) a greater-than-average percentage of Medicare patients (the national average is currently just under 8%), or 2) whose Medicare costs already far exceed their actual Medicare reimbursement because of caps and screens.

Nationally, the 2% cuts could amount to a grand total of nearly $16 million in losses to health centers around the country.  Although these cuts are expected to have a far greater impact on other providers, the impact may be significant for many health centers.  Stay tuned to Health Centers on the Hill and we will continue to let you know of any changes to the sequester and any updated information on what the cuts will mean for your health center.

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