In order to obtain enough votes to increase the debt ceiling, smarter politicians demanded a decrease in the Federal spending of $1.5 trillion over the next ten years.  One of the areas in which these reductions in Federal spending will take place (despite what any politician says) is in the Center for Medicare/Medicaid Services (CMS) budget.  As my understanding of the budget/bebt ceiling deal stands there are two phases of the deficit reduction.  The first stage, which does not include any cuts in Medicare/Medicaid spending, calls for spending cuts of almost $1 trillion over the next decade.  In phase two, a specially-appointed committee of 12 members of congress is to come up with recommendations for an additional $1.5 trillion in further budget cuts over the next ten years, and come up with their recommendations by November.  If the committee does not come up with an agreement for budget cuts, then automatic cuts already written into the new law will take place, including a 2% cut in Medicare reimbursements to providers.

You may recall that there is already the sustainable growth rate (SGR) formula, which calls for physicians to absorb a 29 percent cut in Medicare reimbursement, beginning on Jan. 1, 2012.   Kevin Pho, a blogger who also happens to be a physician, has predicted "horrific" outcomes for physicians. "I wouldn't be surprised to see deep cuts in provider and hospital Medicare payments, on top of the previously scheduled 29-percent cut sans doc fix," he recently blogged. "We're talking a combined 30- to 40-percent cut or more. So, if Medicare patients are having a hard time finding a doctor now, it's nothing compared to the shortages that will come soon."  

"This payment cut would have serious consequences, and we cannot and will not allow it to happen," said Dr. Donald M. Berwick, CMS administrator, in a statement. "We need a permanent SGR fix to solve this problem once and for all. That's why the President's budget and his fiscal framework call for averting these cuts and why we are determined to pass and implement a permanent and sustainable fix."  Changing the formula would cost an estimated $300 billion, with the figure rising with each year.

No matter how you slice it, the political view in Washington is that the economic suffering needs to be 'shared' by those most able to 'share' it.  That means that those individuals and entities that the politicians feel are the wealthiest need to pay more in taxes or get paid less by the government.  In the healthcare industry that means that insurance companies, pharmaceuticals, hospitals and doctors will all have their fees or prices reduced by the government.

 If the 29% reduction in Medicare reimbursement to providers remains on the books and takes affect on Jan,1, 2012, then many providers will stop accepting Medicare patients altogether.  There are already far too many procedures for which the Medicare reimbursement is at, or below, the cost to the doctor, as you well know.  Couple the reduction in payment with the increased mandates in record keeping and privacy protection, and there will be fewer doctors willing to take on the risk to treat Medicare patients   There is also the significant probability that some doctors, or clinics, which do continue to treat Medicare patients will ultimately be forced to close due to lack of income, which will also affect many non-Medicare patients.

Taking a look at Dr. Berwick's statement that $300 billion is needed to 'fix' the SGR problem, that means that the 12 member congressional committee actually needs to make cuts of $1.8 trillion elsewhere in the budget to accomplish both of these goals.  When the choice comes down to who should 'share' more of the burden of the healthcare costs, who do you think the politicians will choose?  The 'rich' healthcare industry providers, or the 'poor' Medicare recipients?

 I don't have any solutions to this problem. I am just pointing out the facts of the situation as it currently stands.  I have stopped treating Medicare patients several years ago, and never been paid a dime from Medicaid sources, as my fees were always denied.  I figure I can lose money in real estate or the stock market justly as easily, without having to treat Medicare patients, and I have.  I know that not every doctor can make the same decision, to not treat Medicare patients, but it would be very interesting if I we did.

The bottom line is that healthcare providers need to be prepared for reduced reimbursement from governmental sources and need to make the changes that they feel best suites their practice and patients. Be proactive and plan ahead, because these changes are coming and will affect your practice.

NOTE:  After i wrote this article S&P did downgrade the US credit rating from AAA to AA, though Warren Buffet disagrees with this move.