NEJM tackles the $85B sequestration question

The $85 billion question of 2013 for healthcare stakeholders is a tough one: What will the impact of sequestration be on the U.S. health sector? John E. McDonough, DPH, MPA, from the Harvard School of Public Health in Boston, outlined the fiscal fallout in a perspective published March 20 in the New England Journal of Medicine.

Sequestration requires cuts of $42.67 billion each from defense-related and nondefense parts of the fiscal 2013 budget, which must be achieved in seven months. Medicare funding will see a 2 percent cut, totaling $11.08 billion in reductions in payments to hospitals, physicians and healthcare providers. Medicaid and the Veterans Health Administration are exempt.

The National Institutes of Health faces an 8.2 percent, or $1.55 billion, cut. The Office of National Coordinator for Health Information Technology faces a $1 million cut.

In contrast, most expenses associated with the Patient Protection and Affordable Care Act will remain untouched. Other exemptions include Medicaid and private insurance subsidies available through health insurance exchanges in January 2014.

McDonough offered a glimmer of hope, and wrote, “This month’s continuing-resolution process will be the next and perhaps final, opportunity for Congress to undo any of this year’s damage.” (The continuing resolution extends last year’s budget until March 27; the government must agree on funding for the current year by then. The Senate reached a deal on the continuing resolution March 20. The measure will proceed to the House for a vote.)

He concluded on a dire note. “As the U.S. economy improves, cuts and uncertainty about federal policy are two factors threatening further improvement; some experts predict that sequestration will reduce real growth in the domestic product by 0.5 to 0.7 percentage points in 2013 if it is not replaced with a new budget. In my view, the damage that the sequester process will inflict on vital healthcare functions at all levels is unnecessary and unfortunate.”