Pay-As-You-Go in Medicare
The COVID-19 pandemic and its wake have resulted in unprecedented challenges for hospitals and health systems, as well as the communities they serve, placing significant strain on the entire health system and its financing as it struggles to recover 1.
Like many individuals and their families, health care systems are facing high inflation and significant increases in workforce costs and shortages in drugs and supplies, including food and energy. Some health care services face challenges in maintaining financial stability as a result. This only is exacerbated by supply chain shortages, backlogs in procedures and appointments due to deferred care, and navigating payment from the government 2. This is complicated by the Pay-As-You-Go Act that will, without action otherwise by Congress, tighten the federal budget and likely impact Medicare.
The Statutory Pay-As-You-Go Act of 2010 (PAYGO), among other elements, mandates that spending and revenue legislation must not increase the federal budget deficit over a 5- or 10-year period 3.
As a result of the American Rescue Plan Act of 2021, should such legislation be enacted without the deliberate provision of offsets, the Office of Management and Budget (OMB) would need to reduce certain types of mandatory federal spending.
This means that Medicare benefit payments and Medicare program integrity spending would have to be cut, although this reduction would not be able to exceed 4%, or approximately $36 billion 4.
To date, although Congress has passed legislation that has increased the deficit several times since the enactment of the Statutory PAYGO law, a PAYGO sequester has never been triggered. Congress has consistently, instead, acted to waive the reductions, or postpone the cuts, preventing a Pay-As-You-Go sequester of Medicare 5.
However, at the end of 2021, Congress deferred action on waiving Statutory PAYGO. This means that Congress still needs to waive these cuts to prevent them from taking full effect in 2023 6.
The American Society of Anesthesiologists (ASA) joined the Surgical Care Coalition in a formal communication to Congressional leadership expressing disappointment with Congressional inaction 7. In particular, the ASA pushed for Congress to cease all Medicare payment cuts, citing record inflation, high practice costs, and the ongoing impacts of COVID-19. The ASA argued that the failure to appropriately address cuts is sure to compromise Medicare’s ability to deliver on its promise to senior generations.
Many health systems, especially those in underserved areas, continue to face colossal financial challenges, as do many individuals. Financial support provided in response to the COVID-19 public health emergency was just enough to keep them afloat, but rising costs, workforce challenges, ongoing supply chain shortages, and lower Medicare and Medicaid reimbursements continue to impact care for much of the US population.
These financial hardships threatens access to health care for patients and entire communities. Without action from Congress, patients will likely be negatively impacted as hospitals cut staffing and services, or increase prices. Many of these decisions and processes will depend on the status of PAYGO. Though the budget deficit is a significant problem, many voices within the health care field argue that limiting Medicare through the Pay-As-You-Go Act is not the appropriate solution.
References
1. Khullar, D., Bond, A. M. & Schpero, W. L. COVID-19 and the Financial Health of US Hospitals. JAMA – J. Am. Med. Assoc. (2020). doi:10.1001/jama.2020.6269
2. Shortages from syringes to dye for diagnostic exams: How world events are straining everyday health care supply | AAMC. Available at: https://www.aamc.org/news-insights/shortages-syringes-dye-diagnostic-exams-how-world-events-are-straining-everyday-health-care-supply. (Accessed: 3rd February 2023)
3. Heniff, B. The statutory Pay-As-You-Go act of 2010: Summary and legislative history. in PAYGO Rules for Congressional and OMB Spending Control (2011).
4. The ‘Pay-As-You-Go’ Budget Rule.
5. Fact Sheet: Statutory PAYGO Sequester Relief Needed for Health Providers | AHA. Available at: https://www.aha.org/fact-sheets/2022-09-13-fact-sheet-statutory-paygo-sequester-relief-needed-health-providers. (Accessed: 3rd February 2023)
6. What is PAYGO? | Tax Policy Center. Available at: https://www.taxpolicycenter.org/briefing-book/what-paygo. (Accessed: 3rd February 2023)
7. Congress Fails to Stop All Medicare Payment Cuts | American Society of Anesthesiologists (ASA). Available at: https://www.asahq.org/advocacy-and-asapac/fda-and-washington-alerts/washington-alerts/2022/12/congress-fails-to-stop-all-medicare-payment-cuts. (Accessed: 3rd February 2023)