The fiscal cliff cuts $1.9 billion from Obamacare. Here’s how.

Posted by Sarah Kliff on January 2, 2013 at 10:50 am

The fiscal cliff deal is, obviously, mostly about preventing the fiscal cliff and stopping a wave of huge spending cuts. At the same time, legislators did find ways to make some relatively important health policy changes too. They include everything from raising Medicare doctor’s pay, repealing a part of the Obamacare and cutting over a billion from the law’s funding. Let’s get right to it.

Obamacare loses $1.7 billion in funding.

The Affordable Care Act did not include a public option, much to liberals’ chagrin. What it did do, as a sort of substitute, is include funding for Consumer Oriented and Operated Plans (CO-OPs). These are meant to be non-profit, customer-owned and operated plans that could test out new ways to deliver health care. These health plans would compete against traditional insurance plans on the exchanges, when they launch in 2014, giving consumers an alternative to for-profit insurance plans.

Since starting a health insurance plan is no easy task, the Affordable Care Act included $3.8 billion loans that would need to be repaid between five and 15 years. Health and Human Services had already loaned out $1.9 billion of that funding to 24 non-profits in 24 different states. The sponsors of these plans include everyone from a farmer’s union in Colorado to the Culinary Health Fund in Nevada.
The fiscal cliff deal doesn’t take back that $1.9 billion that the administration already spent. What it does do is take away most of the remaining $1.9 billion, which could have funded additional CO-OP plans in the future. The law does, however, leave behind 10 percent of the remaining funds to cover the administrative costs of working with the 24 plans that already launched.
Medicare doctors will get paid more. Medicare hospitals will get paid less.
The fiscal cliff deal averted a 26.5 percent pay cut for the doctors who see Medicare patients by including a “doc-fix,” a short-term funding patch to keep doctors’ salaries stable for the next year. Doctors had hoped for the longer term solution that the Obama administration had proposed last month, which would have permanently fixed the formula that creates the regular funding shortfall. Still, a small doc-fix was better than no doc-fix.
“This patch temporarily alleviates the problem, but Congress’ work is not complete,” said American Medical Association president Jeremy Lazarus. “It has simply delayed this massive, unsustainable cut for one year.”

In order to keep doctor salaries stable, Congress had to come up with new funds. As Kaiser Health News’ Mary Agnes Carey reports, they found about half of the $30 billion they needed in cutting Medicare reimbursements to hospitals.
The hospitals were, unsurprisingly, unpleased. “While fixing the physician payment formula is essential, it should not be done by jeopardizing hospitals’ ability to care for seniors and their communities,” said American Hospital Association president Richard Umbenstock. ”That’s why we are very disappointed at the approach taken in this measure.”
So doctors end up with stable salaries for the next year, but that does not mean that the Medicare program came out of this deal unscathed.
The CLASS Act is officially repealed.
The Community Living Assistance Services and Support program, or CLASS Act was part of the Affordable Care Act and meant to be the first, federal long term insurance programs.
Things did not, however, go exactly as planned. The program always relied on voluntary enrollment. That meant if a small group of unhealthy people, who anticipated using the services signed up, the premiums could spike and destabalize the program.
An actuarial review the Obama administration released last October predicted that that sort of scenario would play out. Despite their best modeling efforts, they could not find a way to keep the CLASS Act both affordable and voluntary. After conducting that review, Health and Human Services stopped implementing the CLASS Act altogether.
Since the administration had already stopped implementing the CLASS Act, there’s not a huge practical effect right now of the fiscal cliff deal wiping it off the books completely. The change does not generate any revenue, as the $86 billion in savings were already counted in the baseline budget. Still, there were some Democrats who had hoped that the CLASS Act may, at some point, be revived. Now that option doesn’t exist anymore and health policy journalists will, sadly, retire one of their favorite Obamacare puns: “CLASS dismissed.”