While most media attention on the fiscal cliff has focused on tax rates and cuts in military spending, its potential affect on Medicare has terrified New Jersey’s medical community.
The automatic spending reductions, known in official Washington as sequestration, include a 2 percent cut in Medicare payments.
And while the impact of such cuts would not be immediate, some believe they could mean medical care for seniors would suffer and be harder to obtain.
The 2 percent cut would cost New Jersey health care facilities $133 million in 2013, affecting hospitals, nursing homes and physicians who accept Medicare, the federal health insurance program for seniors.
“This is making people in my position very anxious,” said Morristown Medical Center President David Shulkin. “This will have extremely serious consequences for the state of New Jersey.”
It’s not just the money. A report from Tripp Umbach, a firm specializing in economic impact studies, estimated if the cuts take place, New Jersey would lose more than 14,000 health-related jobs next year. The study was sponsored by the American Hospital Association, the American Medical Association, and the American Nurses Association.
What this means for the 1.4 million New Jerseyans on Medicare is unclear, and much depends on what, if anything, Congress decided to do about Medicare in the coming year.
“For healthcare consumers, they will not see an overnight shutdown of services, but I think we can all be concerned about the compounding effect of these cuts chiseling away at healthcare access over time,” said Kerry McKean Kelly, spokeswoman with the New Jersey Hospitals Association. “The reality is New Jersey hospitals are already dealing with so many significant financial struggles and slim margins. We’ve seen a lot of hospital closures in the last few years … so anytime there is this kind of threat to revenues, it poses a real access to care worry for the community.”
The cuts come at a time when New Jersey hospitals are already in a precarious financial situation. Earlier this month, the New Jersey Hospitals Association released a report showing the state’s hospitals operated with a razor thin margin in 2011, and about one-third were in the red.
The 2 percent cut to Medicare is “especially worrisome,” said Betsy Ryan, NJHA president, because New Jersey hospitals already agreed to a $4.5 billion cut over 10 years to help pay for the Affordable Care Act.
“These cuts would have a significant impact on the well-being of our hospitals, their patients, their communities and the entire Garden State economy,” Ryan said. “These additional cuts would go far too deep into a critical component of our safety net and our economy.”
How much each individual hospital loses depends on what percentage of its revenue comes from Medicare. On the lower end of the spectrum, Jersey City Medical Center gets about 20 percent of its revenue from Medicare. A 2-percent cut means a loss of about $1 million in 2013 — not pleasant but not catastrophic, said chief financial officer Paul Goldberg.
However, Morristown Medical Center has about one-third of its patients on Medicare and stands to lose about $7 million in 2013.
“When there is less money to operate hospitals, there is less money for technology, for staffing ratios,” Shulkin said.
Medicare money also goes to teaching hospitals to help fund medical education. Cuts in the program will result in fewer residency positions, which medical students need before they can be licensed, according to the Association of American Medical Colleges.
The effects of these cuts will be gradual and there are plenty of ways the money can be restored. Should Congress reach a deal in the new year, for example, it could retroactively reimburse hospitals.
Nevertheless, hospitals and long-term care facilities trying to plan their 2013 are fretting over the uncertainty, said Paul Langevin, president of the Health Care Association of New Jersey.
For physicians, the prospect of the ball dropping before congressional action is even more frightening. In addition to the 2 percent cut, they are facing a 27 percent cut in reimbursement rates.
The AMA has repeatedly warned that if something isn’t done, many physicians will reduce the number of Medicare patients they see, making it much harder for seniors to find care.
“Physicians must prepare themselves and their patients for an impending Medicare crisis,” American Medical Association President Jeremy Lazarus, said in a statement. “With a full year to stop this drastic cut, it is absolutely inexcusable that Congress has failed to act, leaving Medicare patients and physicians to deal with the consequences.”
At Hackensack Hospital, where about 40 percent of the patient roll is on Medicare, the cuts translate into a loss of between $6 million and $7 million, said chief financial officer Bob Glenning.
At an organization as large as Hackensack, the cuts can be spread across the system, he said. The hope is they won’t be noticed by patients, but the concern is how long can small cuts fill a big hole. What would 2014 and beyond look like if this isn’t fixed?