Debt deal may hit Medicare

This post comes from Janet Adamy at partner site The Wall Street Journal.

Medicare beneficiaries escaped direct cuts in Washington's debt deal, but the agreement could eventually hit seniors and disabled Americans who rely on the program for medical coverage.

Health industry lobbyists and policy experts say the deal between the White House and congressional leaders effectively opens the door to another round of talks in which lawmakers are likely to weigh increasing the Medicare eligibility age and setting up a means test that might require wealthier people to pay more for the program.

A provision in the deal that allows for payment cuts to health-care providers who treat Medicare recipients could lead hospitals to cut services, industry officials said.

Health care stocks took a broad hit Monday over concerns about the implications of the debt deal. Investors are "waking up to the fact" that health-care spending "will be in the crosshairs" as Congress looks for more cuts, ISI Group analyst Joe Ruggieri wrote in a research note.

• Special coverage on the debt crisis

Hospital stocks were sharply down. Industry heavyweight HCA Holdings Inc. finished Monday off 6.5%. Health insurers posted generally smaller declines, with UnitedHealth Group Inc. down 3.2%.

The $2.1 trillion deal would raise the debt ceiling in two stages and provide initially for $917 billion in spending cuts over a decade. A bipartisan committee of lawmakers would be charged with finding another $1.5 trillion in deficit reduction. If the committee doesn't find at least $1.2 trillion in savings, or Congress doesn't approve its proposals, a different set of spending cuts would kick in. Post continues after video.

To hit the $1.5 trillion in spending cuts, the congressional committee is likely to reconsider major changes to Medicare that the White House and congressional leaders put on the table during this summer's debt-ceiling negotiations. President Barack Obama in earlier negotiations floated the idea of raising the Medicare eligibility age to 67 from 65 in an effort to win Republican concessions. He also said he was open to a means test.

"All those type of issues will certainly be looked at by the committee," said Tom Nickels, a senior vice president at the American Hospital Association.

Should the committee's recommendations not make it into law, the backup spending-cut mechanism would include cuts to Medicare. The agreement says these cuts would affect health-care providers, not beneficiaries, and would be capped at 2%.

Some health care provider groups contend they couldn't absorb such payment cuts without affecting patients. The hospital industry says the cuts could overload emergency rooms, shut down trauma units and reduce patient access to the latest treatments.

The industry is already on the hook for $155 billion in Medicare and Medicaid savings over 10 years under the health overhaul passed last year.

"Some of it may be subtle, but at the end of the day, there is a consequence to such a significant reduction in payments," said Chip Kahn, president of the Federation of American Hospitals, which represents for-profit facilities.

More on The Wall Street Journal and MSN Money:

• How does the debt deal affect you?
• How to really fix the federal budget
• Hitting your personal debt ceiling?
• The coming Social Security shortfall