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Debt Limit Deal Struck - Medicare Cuts Possible

Wednesday, August 03, 2011

President Barack Obama, Senate Majority Leader Harry Reid and Speaker of the House John Boehner reached agreement on a package that ties an increase in the nation’s soon-to-expire debt limit with over $2 trillion in budget deficit reductions.  The agreement effectuates significant changes to spending levels for a variety of federal programs including possible changes to spending for Medicare payments to physicians.  The United States House of Representatives passed the agreement by a vote of 269-261 and the United States Senate passed the agreement 74-26. 

The bipartisan bicameral agreement would raise the debt limit in two steps. Initially, it would raise the debt limit through the beginning of 2012 by $900 billion linking the increase with deficit reduction of $917 billion. The savings would occur through the establishment of a series of “caps” on spending. 

The second step of the agreement would automatically increase the debt limit by an additional $1.2 to $1.5 trillion depending on the amount of offsetting spending cuts that are identified.  Specifically, step two establishes a special joint committee made up of 12 members (6 from the House and 6 members from the Senate, with an equal number of Republicans and Democrats) whose charge is to develop legislation that would identify $1.5 trillion in deficit reduction, either through spending cuts, entitlement reform or tax increases, by Thanksgiving of 2011. 

If the joint committee is not able to agree on legislation or if Congress does not pass the committee’s deficit reduction proposal by Christmas, sequestration - a process of automatic cuts - is triggered. This sequestration mechanism would cause across-the-board cuts in federal government spending, with half of the cuts coming from defense spending and the other half from other government programs including Medicare.  The agreement specifically exempts Medicaid, Social Security, veterans’ benefits and other “essential” benefits from the cuts.  Sequestration would also be triggered if the committee recommends and Congress passes cuts that are less than $1.2 trillion to make up the difference. The debt limit would only be increased by the amount of offsetting spending cuts, with a minimum of $1.2 trillion in cuts. The sequestration spending cuts would go into effect beginning in Fiscal Year 2013 – October 2012. 

Documents available as part of the agreement state that Medicare providers and not Medicare beneficiaries would be cut as part of the sequestration mechanism. These documents specify that Medicare cuts are capped at 2 percent.

With regard to balancing the budget, the agreement requires each chamber to vote on a Balanced Budget Amendment between October 1 and December 31. If the Balanced Budget Amendment passes both the House and Senate and is sent to the states for ratification; the second debt limit would be increased without the need for deficit reduction through the joint committee or sequestration.  

In addition to ASA’s ongoing outreach to key lawmakers and staff regarding Medicare payments for anesthesiologists, ASA will also follow with particular interest the actions of the special joint committee.   Additional advocacy activities will be required to determine how possible changes to Medicare payments to physicians under this package would interact with projected Sustainable Growth Rate (SGR) related payment reductions in the future.

Additional details about this package and its implications for anesthesiologists will be provided as they become available.

Click here to read the actual legislation.

Click here for a section by section summary of the legislation. 

Click here to read the Congressional Budget Office “score.”

Click here to view a flow chart of the process of raising the debt limit. 

Click here to read a PowerPoint summary presented by Speaker of the House John Boehner.

Click here to read an analysis by the Democratic Policy and Communications Center. 

 

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