House Republicans and Senate Democrats are now crafting separate strategies to raise the debt ceiling and cut spending, as bipartisan talks at the White House broke down over the weekend and as the August 2 deadline to raise the debt ceiling draws closer. While a final solution remains to be seen, what is clear is that any such plan will likely have a notable impact on the healthcare industry.

Last week, the Senate’s bipartisan “Gang of Six” released a plan that would cut $4 trillion from the deficit over the next 10 years. While this plan has not been determined to be the one that will move forward, it includes significant provisions that will impact Medicare reimbursements. Notably, the plan would require the permanent repeal or replacement of the Sustainable Growth Rate (SGR) formula that determines Medicare physician reimbursements – a provision that would cost nearly $300 billion and would require offsets from other parts of the healthcare industry such as hospitals, nursing homes and home health agencies.

Other healthcare cuts previously discussed during recent negotiations have included:

  • $100 billion in savings by reforming the way in which the federal government pays states for Medicaid coverage;
  • $14 billion in savings by reforming Medicare payments to rural hospitals;
  • $14 billion in savings by making adjustments to Medicare’s graduate medical education (GME) and indirect medical education (IME) programs;
  • $50 billion in savings by changing payments and cost-sharing for skilled nursing facilities and home health;
  • Up to $16 billion in savings by reforming Medicare payments to clinical laboratories and related cost-sharing; and
  • More than $3 billion in savings by changing the payment structure for Medicare Part B drugs.

Absent a final plan and specific details, the above are simply cuts that have been suggested by various negotiating groups. Despite the current lack of details, however, whatever solution that eventually emerges – be it short-term or long-term – will likely include at least some iteration of these previously proposed cost savings.