The 2012 elections have finally come and gone, now what?
President Barack Obama won a second term as President of the United States. Republicans held their majority in the House of Representatives. Democrats maintained their slim majority in the Senate. What does it all mean? Divided government is here to stay and many of the important issues that loomed over the election and hung in the balance of the potential outcomes can now start moving again. Issues likely to be taken up by a “lame duck” congressional session prior to the new Congress taking office range from updating the sustainable growth rate, aka “doc fix”, to extending the Bush tax cuts and finding offsets for the $1.2 trillion automatic sequestration cuts scheduled to take effect on January 1, 2013. There are also several fast approaching deadlines and requirements for implementation of key Obamacare initiatives that will be decided by individual states before the end of the year.
Taken together, the issues listed above seem quite daunting and distinct from one another. However, all are likely to be discussed in a lame duck congress and negotiated as part of a large deal, a ‘grand bargain’ that will include concessions from both President Obama and Congressional Republicans to get our nations’ debt problem on a more secure footing moving forward. For the sake of sanity, let’s take each of these issues one at a time.
Sequestration Cuts — As part of the debt negotiations in the summer of 2011, President Obama and Speaker John Boehner agreed to a deal including $1.2 trillion in automatic budget cuts, called “sequestration” if the two parties were not able to reach a deal cutting at least that amount. Well, no one was surprised when they didn’t reach an agreement; $1.2 trillion in cuts will be activated if a larger agreement is not reached before the end of the year. $600 billion of the cuts are targeted to the Department of Defense. Social Security and Medicaid are exempt from the cuts, and cuts to Medicare are limited to a 2% across-the-board Medicare provider reimbursement cut. Elected officials from both sides of the aisle want to avoid sequestration, which they say would cause an economic crisis. Big lobbying groups, from defense contractors to hospitals and physicians, will be pushing for this to go away in the lame duck session.
Sustainable Growth Rate, aka “doc fix” Extension — It seems every year after an election Congress takes up some sort of extension of the sustainable growth rate, aka doc fix, to avoid a 27% reimbursement cut to physicians. In March of 2012, Congress passed an extension of the SGR that will expire at the end of 2012. Physicians would like to include a permanent extension of the SGR in the “grand bargain” negotiations to avoid the uncertainty of having to extend it multiple times a year for the past ten years. All told, a permanent extension would cost somewhere around $80 billion. If the permanent extension finds its way into the larger package, what will be sacrificed is unknown, but the overall cost could prove costly to other Medicare providers who do not enjoy such a powerful lobby in Washington DC.
Extension of Tax Cuts — Tax cuts for virtually all wage earners are set to expire at the end of the year without Congressional action extending them. What are commonly referred to as the “Bush tax cuts”, include cuts across all income levels, including the wealthiest Americans. Extension of these tax cuts has been on the Congressional agenda since this past summer, but none have been extended or revoked to date. Democrats want to separate out the tax cuts for upper income Americans, extend the middle class tax cut and use the additional revenue to stave off sequestration or help extend the doc fix as part of a larger deal on deficit reduction. Republicans have so far refused to separate the upper income tax cuts from the rest, citing the damage it would do to the already slow economic recovery, but have been open to negotiating a larger deal on deficit reduction. Expect the extension of the tax cuts for upper income Americans to be front and center in the grand bargain negotiations. Neither side is likely to get what they want, but one way or another, both sides know the middle class tax cuts need to be extended.
Implementation of Obamacare — The fate of Obamacare largely hung in the balance of the Presidential election. With the President winning reelection, we will now likely see a lot of action on behalf of individual states to comply with looming requirement deadlines as part of the Patient Protection Affordable Care Act (PPACA.) There are three main initiatives that will largely be driven by state governments.
Medicaid Expansions — First, the expansion of state Medicaid rolls to 133% of the Federal Poverty Level. The PPACA had made this extension mandatory for all states, but the Supreme Court ruled that unconstitutional and made it voluntary for states to participate. The Federal government will pay for 100% of costs associated with treating the newly eligible Medicaid recipients from 2014-2016, with federal matching funds slowly reverting to 90% by 2020. The expansions are estimated to grow state Medicaid enrollment by more than 16 million over the next eight years. To date, six states have announced they will not participate in the expansions, Florida, Georgia, Louisiana, Mississippi, South Carolina, Texas. Arkansas, California, Connecticut, Delaware, District of Columbia, Hawaii, Illinois, Maryland, Massachusetts, Minnesota, Rhode Island, Vermont and Washington have all announced their participation. Action on the Medicaid expansions was largely tabled until after the Presidential election for many states, so expect to see a flurry of decisions by Governors and legislatures before the end of the year.
State Based Health Exchanges — Many states have also been waiting for the outcome of the Presidential election to determine whether they will move forward with creating “state based health exchanges”, online portals similar to priceline.com where consumers will shop for insurance policies when the individual mandate kicks in in 2014. An estimated 17 million Americans are projected to utilize these health exchanges to purchase private insurance over the next 8 years. Many states chose to hold off spending the resources necessary to create such an online marketplace, but if they do not submit a plan to CMS by mid-November, the federal government will setup an exchange for them. States typically will limit federal involvement as much as possible, so expect a flurry of activity on the creation of these exchanges. Delays from CMS to allow for more states to fully participate in the program are also likely. There is another lawsuit which claims consumers who use a federally-run exchange in their state are not eligible for federal subsidies for their insurance policy. The case is currently in circuit courts, but could potentially lead to more delays on implementation.
Essential Health Benefits Packages — The essential health benefits package was originally designed as a national minimum insurance plan that could be sold on the state based health exchanges. However, in search of political acquiescence, CMS decided to kick the decision down to individual states, so now we will have 50 different essential health benefit packages. Obamacare mandated ten broad categories of coverage, including “rehabilitative and habilitative services and devices”, which is likely to include O&P. “Likely to include” is not “will include” however. Each state can choose from 9 plans currently being offered in their state and amend where necessary to meet Obamacare guidelines. The vast majority of these plans do include some type of orthotic and prosthetic coverage, but we must be organized in states that may be moving to exclude, or cap this type of care. Again, with many states dragging their feet on implementation until after the election, expect to see delays from mandated deadlines to allow for more state participation.
So, as you can see there are a lot of moving parts to the lame duck congressional session. Taken separately, these issues do not seem to have much direct impact on orthotic and prosthetic professionals, save for the 2% across-the-board reimbursement cut. However, the lame duck session does provide an opportunity for the O&P profession to advance HR 1958, The Medicare O&P Improvement Act, which would provide additional revenue to negotiators and continue to apply pressure on CMS to define “qualified practitioner” and move toward only reimbursing licensed, or otherwise credentialed providers.
While many are pushing for a large, “grand bargain” between the House, Senate and the President, it may be difficult to put such a large package together before the new Congress is convened. If the deal does not materialize quickly, expect to see a short term extension of all the issues listed above and an effort to delay the sequestration cuts for a few months to allow more time for negotiations of the larger package.
Want to receive important updates on government policies and regulations that will impact O&P as they happen? Sign up to receive updates as they happen @ opga.com