Federal Sequestration Cuts and the Hospice Community

Categories: Policy.

As part of each NHPCO board meeting, the board of directors discusses relevant issues in some depth. At the first meeting of the year held on January 26, 2013, the board looked at issues relating to the Fiscal Cliff and Sequestration cuts that will affect the hospice community beginning April 1, 2013.

The following notes were shared with the membership in a GAR Update that went out on February 6. Given the significance of the issue, providers should be familiar with factors outlined below.

Fiscal Cliff Continues

• First, we must share some positive news. In 2012, hospice was one of the very few provider communities that did not face new reimbursement cuts – almost all other provider groups did. At one time, hospice was indeed on the table to be cut but through the work of our combined advocacy efforts as a unified community, we changed that. However, 2013 will not be a year free from cuts.

• Most Americans are aware that Congress took action in January to avoid the Fiscal Cliff that would impact just about every aspect of federal spending. While most tax increases were avoided, Congress provided only short term relief from dramatic spending cuts. Indeed, absent a more considered alternative, “across the board” spending cuts will be made effective on March 1, 2013. These forced spending cuts are a process called Sequestration – and in most cases, legislators want to avoid sequestration because the cuts are done with such a broad brush that they negatively impact just about everyone.

• Unless Congress acts otherwise, sequestration cuts for Medicare providers will go into effect on April 1, 2013, and that will reduce reimbursement for all Medicare providers by 2%. This cut would remain in place for ten years.

• The cuts to Medicare hospice reimbursements are for services provided on or after April 1, 2013; the MAC will deduct 2% from the reimbursement before paying the claim.  The hospice will NOT bill at the 98% rate. 

• But there is other possible turbulence ahead for hospice. While 2% is the limit that Medicare reimbursements will be cut under Sequestration, this is by no means the only threat to our rates – and we’re already faced with rate cuts established by changes to the BNAF and other administration actions of the past.

• The issue gets more complicated. The federal budget for 2013 has yet to be passed but must be completed by April 15 and Congress has voted to push its decision on the debt ceiling to May 2013.

• The question we’re asking is whether the sequestration cuts that go into effect on April 1 will remain in effect. Congress will make a decision later in the summer of 2013 whether to leave the cuts in place or come up with another plan. If Congress wants to do away with sequestration, they must come up with $1.2 trillion in other budget cuts. There is no way to forecast where those cuts might come from and whether Medicare providers, including hospice, might face a cut greater than 2%.

• Some observers of the process have suggested, by leaving the Sequestration cuts in place until the summer that might indicate that Congress wants to examine funding issues in more detail. They will use these extra months to determine how cuts are affecting a range of programs.

• Years of deficit spending are catching up in Washington, and this Congress is facing the reality that something must be done and our nation’s fiscal challenges cannot be avoided any longer. There is no simple answer but it’s safe to predict that just about every sector of national spending will be affected. With that in mind, we stress the importance that all providers prepare for the future in a fiscally prudent manner.

NHPCO and its affiliate organization the Hospice Action Network are strategically planning how to advocate for hospice to minimize the impact of our nation’s financial situation and to protect the high quality care we provide to patients and families.


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