Short Takes On News & Events

Defense and Docs: Perfect Together?

By Mary Agnes Carey

October 24th, 2011, 3:44 PM

It is often said that politics makes strange bedfellows.  That’s especially true with the high-stakes budget discussions surrounding the congressional deficit reduction panel.

Photo by Karl Eisenhower/KHN

As physicians seek to forestall cuts in Medicare payments, their interests may be aligned with the defense industry as both press the super committee to strike a deal.

They would both benefit from preventing automatic cuts that will take effect in 2013 if the panel, scheduled to meet again Wednesday, does not agree to a package of at least $1.2 trillion of spending cuts over the next decade. Half of those automatic cuts, known as a “sequester,” would come from defense and half from domestic spending, with Medicaid shielded from cuts and Medicare providers, like hospitals, limited to a 2 percent payment reduction.  Physicians face much larger automatic cuts to Medicare reimbursements — nearly 30 percent in January — under the sustainable growth rate formula in current law.

Defense Secretary Leon Panetta has said that taking cuts beyond those included in the summer’s debt deal would be devastating to the military and hurt the nation’s national security.  “If this sequester goes into effect and it doubles the number of cuts, then it will truly devastate our national defense. … It will badly damage our capabilities for the future,” Panetta told the House Armed Services Committee earlier this month. Panetta’s wealth of experience – he has served as a House member, President Bill Clinton’s chief of staff and budget director and most recently director of the CIA – is expected to give him extra clout as he tries to shield defense from any across-the-board cuts. Members of the House and Senate armed services committees also warn that additional defense cuts will cause serious harm.

Physicians are just as determined in seeking a repeal of what dozens of doctor groups dubbed “the fatally flawed Medicare sustainable growth rate formula” in a letter sent to the super committee last month. Physicians are getting some help from Capitol Hill, too. Rep. Allyson Schwartz, D-Pa., and 113 of her colleagues told the panel last month that it must “put an end to the fiscal irresponsibility that has defined Medicare payment policies for a decade.”

Individuals with knowledge of the physician and defense communities say there’s no coordinated collaboration between the two so far, but they also say not to rule it out in the future.

“Nothing formal has been instituted, but it’s been noted that there’s a commonality of interest,” said one health care lobbyist who also has contacts in the defense industry. Another physician source said that since both groups are hoping for a broader deal they may join forces at some point, especially if and when the panel gets closer to a deal. Both individuals asked for anonymity due to the sensitivity of the super committee discussions.

Defense groups have supported the physician community’s yearly quest to beat back Medicare payment cuts, since payment rates for Tricare, the health care program that serves active duty service members and others, are tied to Medicare. But the cost of a permanent SGR fix — $300 billion over the next decade – may cause the super committee to punt, forcing Congress to tackle the issue later in the year and possibly pass a one-year patch rather than a permanent solution.

The panel has the power — but not necessarily the votes — to strike a deal that hits both health care and defense, among other interests. With that in mind, health groups that would fare better under a sequester, where Medicaid and Medicare are protected, may be happier if the super committee can’t report a package by its Nov. 23 deadline. And of course, Congress has plenty of time between now and 2013 to reverse any impending cuts.

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