Fiscal Cliff Deal Passed: Impact on Orthotics and Prosthetics

The President, congressional Republicans and Democrats finally reached a bipartisan agreement earlier this week to avert the worst impacts of the dreaded “fiscal cliff” that has consumed Washington DC since the Presidential election. Many thought that after months long talks between the President and Speaker Boehner broke down, and separate talks between Senate Majority Leader Reid and Minority Leader McConnell fizzled that we could be headed over the cliff on New Years Eve. Enter Vice President Joe Biden at the last-minute to cut a last minute deal with Minority Leader McConnell just hours before midnight on December 31st. The deal achieved large bipartisan majorities in both the House and Senate, and the worst of the fiscal cliff was averted.

View the complete bill here

The deal includes mostly tax changes, including the extension of Bush-era tax cuts on incomes less than $400,000 for individuals and the extension of key tax credits utilized by millions of Americans. Unemployment insurance will be extended for another year and a 26% reimbursement cut to physicians, aka “doc fix”, was also averted for another twelve months.  

The main impact of the deal on orthotics and prosthetics is that it postpones the dreaded “sequestration” cuts for two months. Created as part of the debt ceiling negotiations in 2011, the sequestration cuts would have cut Medicare provider reimbursements across the board by 2% beginning January 1st, 2013.  That 2% cut is now off the table until the end of March, when yet another self-imposed disaster of a deadline to extend the federal debt ceiling approaches.  The bill also extended the look back period on Medicare overpayments from three years to five, adding yet more headaches for orthotic and prosthetic Medicare providers.

The deal is heavily slanted toward new revenues and tax credit extensions, but in addition to the look back period extension, there were a few “pay for’s” included in the final deal. Competitive bidding rates will be extended to diabetic test strips being sold by independent pharmacies, and hospitals treating Medicaid patients saw another large cut to DSH payments to help cover the “doc fix” extension. 

While the deal reached earlier this week does include new revenue, it does not include the large-scale entitlement reform package that had been negotiated by President Obama and Speaker Boehner.  Changes to Medicare/Medicaid that had been included could have a large impact on the O&P profession and the health care industry in general, but we can only speculate as to which provisions could be included in a potential deal. Both sides agreed to continue negotiating a larger deal to reform entitlement programs and find additional spending cuts to reduce the federal deficit moving forward. Expect this to be a major topic of discussion throughout the run up to the debt ceiling extension this spring.

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