Just hours before a midnight deadline Tuesday, Congress passed legislation that raised the federal debt ceiling, avoiding a default that would have far-reaching consequences, including the Medicare and Medicaid programs. The debt deal is temporary and calls for a new Joint Select Committee on Deficit Reduction to come up with recommendations on how to further reduce the budget by $1.5 trillion by November 23, 2011. If the committee fails to reach its target or Congress does not act on the recommendations by December 23, 2011, then the debt ceiling would automatically be raised by $1.2 trillion, using across-the-board cuts to achieve savings. Those cuts would be divided between the defense budget and non-defense discretionary and mandatory spending for FY 2013-2021.

If the automatic cuts take effect, cuts in Medicare spending would be capped at 2%, but benefits to enrollees would not be cut. That means the Medicare spending cuts would be achieved through lowered payments to physicians and other Medicare providers.

The debt deal does not address the long-term fiscal health of the Medicare payment system (Sustainable Growth Rate or SGR), and physician pay rates are scheduled to be cut by 29.5% on January 1, 2012. The AMA informs the NCMS that the Medicare physician payment issue is expected to be addressed by the Deficit Reduction Committee, but that may prove to be challenging because of the savings levels the committee must achieve. Committee members will be selected by House and Senate leaders.

NCMS will be closely monitoring developments in the deficit reduction process and will keep members informed through special alerts, updates, analysis in the Bulletin, online at https://www.compassionatecarenc.org/ and by email. We also will be in daily communication with the North Carolina Congressional Delegation working on behalf of physicians and their patients.