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eDocTalk article

Medicare, Medicaid cuts loom <br> at both state and federal levels

December 2012

A top concern as a result of the Nov. 6 election continues to be potential cuts to Medicare and Medicaid, specifically hospital and physician reimbursements. Providers will need to follow these issues closely and continue to advocate for solutions that offer the greatest benefit to our patients and the communities we serve.

With President Obama retaining the White House, the U.S. Senate maintaining a Democratic majority and the U.S. House maintaining a Republican majority, implementing health reform and the future of the Affordable Care Act are no longer in question at the national level.

The big question looming: Will collaboration be possible in order to meet the challenges ahead, or will the paralysis and political division in Congress continue? House leadership is expected to continue to focus on repealing specific aspects of the Affordable Care Act and the Senate is expected to continue to reject these efforts.

What has changed is the leverage President Obama gained by winning re-election. This leverage may force House leaders to consider negotiation and compromise on a number of the most pressing issues. Each of these issues has some impact on physicians and hospitals. Over the next six months Congress must address these issues:

  • Expiring moratorium on Medicare physician payment cuts (27 percent cut to take effect January 2013 without Congressional action)
  • Expiring Medicare extenders
  • Budget sequester (2 percent across the board cuts to Medicare payments without Congressional action)
  • Continuing budget resolution funding all government expires March 30, 2013 (all government payments stop without Congressional action)
  • Payroll tax cuts
  • Bush/Obama tax cuts
  • Emergency Unemployment benefits expiration
  • Extension of the debt ceiling


Congress reconvened Nov. 13 to begin discussion of these immediate issues. It is expected to enact short-term stopgap measures to prevent:

  • Expiration of the moratorium on Medicare physician payment cuts
  • Expiration of the Medicare extenders
  • Enactment of sequestration (cuts to Medicare payments)

Oregon: Physician and hospital reimbursements at risk

In Oregon, Democrats prevailed in all the statewide races and secured the seats necessary to regain control of the Oregon House of Representatives (34-26). They retained control of the Senate (16-14).

Democratic control will make it easier for Gov. John Kitzhaber to move his agenda forward. Education and health care continue to top his list. He recently added Public Employees Retirement System (PERS) reform as a 2013 priority. The governor believes it is necessary--both to slow the growth of state health care costs and reform PERS in order to free up state funds for education. While PERS reform is popular with many Republicans, it is not supported by public employee unions that are influential with some Democrats. This could present a challenge, even with party alignment.

Oregon’s health care transformation, creation of Coordinated Care Organizations for Medicaid clients (such as Health Share of Oregon), and building Oregon’s insurance exchange will march forward. No significant changes are anticipated in this regard.

Balancing the state budget will again be a challenge, as projected spending continues to outpace projected revenue. If the legislature is unable to raise adequate and stable funding for Oregon’s Medicaid program, hospital and physician reimbursement could be at risk. Oregon is looking at a $1.8 – $2 billion funding gap in the 2013-15 Medicaid budget due to the expiration of Oregon’s hospital and insurance premium taxes in 2013. Passing new taxes could prove difficult, as Democrats in the House will be two votes short of the super majority needed to pass tax legislation.

Washington: Reimbursements vulnerable

In Washington State, voters elected former state legislator and Congressman Jay Inslee (D) to replace retiring Gov. Christine Gregoire. Democrats retained control of both the House and Senate. This removes doubt as to whether the state will move forward as planned with implementing federal health reform. While Governor-elect Inslee has said he supports full expansion of Medicaid and continued design of the state’s health insurance exchange, not all legislators agree.

With the state facing a continued budget shortfall, health care services, and hospital and physician reimbursement are vulnerable to cuts. Legislators will grapple with the question of where to cut the budget and/or where to enact new revenues. This issue will be complicated by recent voter approval of a two-thirds majority requirement for passage of any new revenue. This requirement continues to be challenged in court as unconstitutional.