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HIT and Sequestration


HIT has thus far survived several fiscal cliffs, a major recession, an election, and probably many things we don’t know about, yet.

For those who do not know about ‘Sequestration” this is all about it in a nutshell (no pun intended). Sequestration 2013 has occurred.  The effects yield about a 2% reduction in the Federal Budget. (by the way there is no budget). We have not had an official budget passed by Congress since 1997.  

When was the last time we had a budget bill that was approved?

April of 2009. But technically it was just an “omnibus spending bill,” and President Barack Obama was none too thrilled to be signing it, citing the excessive number of earmark projects. The following year, Democrats chose not to put forth a budget bill because they deemed it politically imprudent during the hotly contested midterm elections. Same thing happened the next year. You get the point. 

How will this effect health care outlays?

HHS Secretary K. Sibelius sitting to the right of President Obama as he discusses sequestration and it’s effect on health reform and PPACA

obama sequester congress

1. HIT incentive pays will be cut by 2%

2..Projected outlays for mobile health development will diminish by 2% as well. Reductions for the FDA will effect the FDAs program to certify and regulate mobile health applications in development.  Mobile health development during the past two years has grown enormously.  My assessment is that it will continue and not be effected much by not having the FDA supervising the ball game.  The market place controls this type of activity. There is no law stating that mobile health applications cannot be sold, but caveat emptor.  There may be some reluctance on VC money. Most serious developers like to know what they will be up against.

3. Medicare reimbursements will diminish by 2% as well.

The Hill reports sequestration will slash $ 11 billion USD from Medicare’s budget, take millions of dollars away from Affordable Care Act implementation programs.

Grants to help states establish insurance exchanges — new marketplaces for private insurance coverage — would lose $66 million, the administration said. The law's prevention and public health fund would lose $76 million

Congress exempted Medicaid and the Children's Health Insurance Program from the sequester, but other healthcare programs would have to absorb big hits.
The Food and Drug Administration would lose $318 million — more than 8 percent of its budget. And the National Institutes of Health would see a cut of more than $2.5 billion. Academics and other advocates for medical research say the NIH cuts would be devastating for medical science.

And it is even more important to realize this is not just a one year cut in spending. The cuts equal roughly $1 trillion over the next ten years and make significant cuts in defense, health care, and other government spending. Both parties are struggling to find common ground on how to replace these cuts with more politically and economically palatable ones.

The looming 2% sequester of Medicare spending to reduce the federal deficit could result in 766,000 fewer healthcare and related jobs by 2021, according to an economic analysis from three healthcare interest groups (PDF).

These facts are laid out by Modern Health, and The Hill.

And there will be secondary and consequential effects in employment (766,000 jobs) according to estimates

“The report categorizes the job losses as those having a direct effect on healthcare; those having an indirect effect, which reflects the impact of local industries buying goods and services from other industries; and those having an induced effect, which relates to the jobs lost when workers don't re-spend their income. In 2013 alone, the report estimates 496,431 fewer direct-effect jobs, 88,453 fewer indirect-effect jobs and 196,222 induced-effect jobs.”

Because health costs are now such a large portion of the Gross Domestic Product the relative 2% reduction of expenditure in Medicare outlay it will have a relatively greater effect on the overall economy, than a 2% contraction in another sector.

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