Federal Budget Sequestration And Healthcare: A Physical Examination Of The Side Effects

“Sequestration” is the government jargon for the across-the-board federal budget cuts to begin on Friday, March 1. If you remember, in 2011, Congress traveled to the brink of default after refusing to raise the debt ceiling without significant spending cuts. What resulted was the Budget Control Act of 2011, setting up a congressional “supercommittee” to achieve at least $1.2 trillion in budget cuts or revenue increases.1 If Congress could not reach an agreement, the same amount would be cut from defense and non-defense spending, sacred cows for Republicans and Democrats respectively.

The thought was that sequestration would inflict so much bipartisan pain that Congress would be forced to act. As you know, the supercommittee was a big failure and now we are faced with the reality of these across-the-board cuts going into effect on March 1.

It will impact nearly every government agency including the Pentagon, the Federal Aviation Administration, the National Oceanic and Atmospheric Administration, the National Weather Service, the National Parks Service, the National Aeronautics and Space Administration, the Department of Homeland Security, and the Department of Justice.1 The reported effects of sequestration range from the gutting of our military to long lines at the airport but the side effects to our healthcare system will be particularly morbid.

While most government services would take an 8.2 percent cut, Social Security, Medicaid, veteran benefits and active duty military pay are exempt.1 However, Medicare reimbursement will be cut by 2 percent for providers and hospitals. This cut is on top of the multiple disincentives already imposed or proposed by the federal government for non-compliance with e-prescribing, electronic health records and the Physician Quality Reporting System. Physicians, who have seen payments reduced and expenses increase yearly, will be forced to absorb the cut or opt out of the Medicare program.

Additional impacts on healthcare will far exceed the 2 percent cut to Medicare. The Food and Drug Administration (FDA), the National Institutes of Health (NIH) and the Centers for Disease Control and Prevention (CDC) are all on the chopping block for budget cuts.

The FDA, already underfunded and criticized for its slow response in reviewing new drug and device applications, will face further delays that could become very costly for manufacturers.1 Having fewer FDA inspectors on the job will increase meat and produce prices by slowing the supply chain and increasing waste. The NIH cuts could slow scientific progress on development of new treatments for diseases. This will affect studies currently in the works as well as new applications for research. Finally, cuts to the CDC will hinder the country’s response in the event of a disease outbreak.

Graduate medical education payments by Medicare will be reduced as a part of sequestration but the direct effect on residency training is not yet known. It may aggravate what we already predict to be a 90,000 shortage of physicians across all specialties by 2020.2

This congressionally self-inflicted injury, sequestration, could have been prevented. If no action happens, the cuts could hinder healthcare delivery, patient safety, and research and development in this country for a decade.

References

1. Available at https://www.whitehouse.govhttps://s3.amazonaws.com/HMP/hmp_ln/imported/omb/assets/legislative_re… .

2. Available at
https://www.aamc.org/initiatives/fixdocshortage/ .