Sequestration Might Be Least Bad Outcome for Healthcare

Congress's 2010 attempt to impose fiscal discipline on itself through a blunt instrument of sequestration might be crude, but should it happen next January, healthcare reimbursement might suffer much less than other parts of the federal budget.

A panel of experts at the American Hospital Association's Leadership Summit in San Francisco, while calling such an outcome a "super failure," say that a provision in the sequestration law that limits Medicare funding cuts to 2% will be much less painful than the cuts to defense and other domestic programs, which would be higher than 10%.

This makes sequestration possibly the least bad option for a healthcare industry already reeling from demands that it cut the rate of cost growth in a sector where spending has grown at more than double the rate of general inflation for most of the past two decades.

While Congress may yet revisit the automatic spending cuts set to kick in on January 2, 2013, they must find enough votes to do so, something that has been elusive in recent years. Republicans seem intent on preventing the automatic $54.5 billion cuts to defense spending, instead seeking to shift those cuts to domestic programs, while Democrats seem determined to push for the opposite.