Debt Ceiling Bill Could Have Implications for Neurologists

August 4, 2011

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The recent debt ceiling increase agreement by Congress calls for a two-step increase in the debt limit balanced with two rounds of corresponding spending cuts—producing a total of $2.4 trillion reductions in spending over the next decade.

Taking effect immediately, the debt ceiling will increase $900 billion and will be matched with $1 trillion worth of cuts from discretionary spending. By November 23, 2011, a newly established Joint Committee on Deficit Reductions will present recommendations to Congress on how to reduce the deficit by at least another $1.2 trillion. Congress will then have until December 23, 2011, to either pass or reject the committee recommendations. It should be noted that no amendments will be allowed during debate of the committee's recommendations. During this time, the debt ceiling will increase a second time—up to $1.5 trillion—whether Congress acts on the committee's recommendations or not. It is at this point in the process where payments to Medicare could be affected:

  • If the committee fails to produce recommendations, a cut of up to 2 percent to the Medicare program will be triggered automatically. These reductions can't influence beneficiary's premiums or restrict benefits. In other words, these cuts will most likely affect payments to physicians and other providers.
  • If the committee's proposal is enacted by Congress, its recommendations could include changes to Medicare and other entitlement programs. These recommendations might also influence payments to physicians. It's hard to predict exactly what sort of entitlement reforms might be proposed, but some analysts suggest the committee might entertain the following possibilities: changing Medicare eligibility criteria as described in the Lieberman/Coburn proposal; improving the coordination of care for dual eligible beneficiaries; and cutting payments to providers for services that are thought to be overpriced.

The debt ceiling agreement also will affect graduate medical education, specifically changes to the graduate and professional student loan programs. In a nutshell, medical students will have to start paying the interest on their subsidized graduate loans earlier. Up until now, the government paid the interest on the subsidized loan until six months after graduation. In addition, repayment incentives that rewarded on-time 12-months loan payments are eliminated. Both changes take effect on July 1, 2012. Although, a large portion of money saved this way will go toward supporting Pell Grants (funding for poor college students), these student loan cuts will increase education costs for future neurologists.