John Gorman

New Conventional Wisdom: A Government Shutdown and New Debt Crisis are Gonna Happen

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Health care politics here in Washington are getting curiouser and curiouser by the minute.  The new conventional wisdom is that we are careening toward a government shutdown on October 1, and a newly-manufactured debt ceiling crisis a week later, with ObamaCare and every other government-sponsored health program hanging in the balance.  Our long national nightmare that is the extreme right wing of the GOP continues.

Things got interesting earlier this week when House Speaker John Boehner capitulated to 30-40 right-wingers in the House and agreed to hold a vote on a bill with continued government funding (a continuing resolution or CR), but zeroing-out ObamaCare.  This time Boehner has the votes for it, as the ObamaCare defunding language is part of the bill itself and not just a rider which drew such derision from the Tea Party.  The vote will likely come this Friday, and it will pass.  This is the easy vote for Boehner and House Republicans.  It’s an express elevator to political hell after that.

Once the CR goes over to the Senate, here’s how the whole thing could play out. First, know this: the House CR is dead on arrival in the Senate.  Dead. Stillborn. Democrats and a handful of rational Republicans have what is close to a filibuster-proof majority to stop the “defund ObamaCare” nonsense. The wingnut faction in the upper chamber, led by Senators Ted Cruz (R-TX) and Rand Paul (R-KY), has promised to filibuster, but that will only delay and not stop the train. The Senate will pass a version without the defunding language and send it back to the House.  Even Cruz confirms this is the likely outcome.  And there will only be days — maybe hours — left before a shutdown begins on October 1.

Boehner will then be forced to throw himself on the mercy of his extremists, saying he did everything he could to stop ObamaCare.  But it won’t be enough for the hardcore on the right…and they will let the shutdown happen.  They will shake the economy again with their continuing irrationality and call a storm of holy friendly fire on their own party.

The question is how long Boehner can withstand the public outrage before he crumbles (my money is on a 5-7 day shutdown)…and is forced to form a coalition between moderate Republicans and Nancy Pelosi and the Democrats to reopen the government.  This will cause a revolt from Boehner’s right unless he agrees to the same tactics when the debt ceiling is breached a week later in mid-October, and we go through the same manufactured crisis all over again, this time with the nation’s credit rating and capital markets hanging in the balance.  Again.  And there could be far worse consequences of a debt ceiling breach than a government shutdown, especially for Medicare and Medicaid.

As we’ve mentioned here before, a government shutdown is bad enough.  What happens to Medicare and Medicaid when DC closes its doors depends on how long the shutdown lasts, but it ain’t pretty no matter what.  If it goes longer than 30 days, it’s going to hurt, bad. A full-blown extended government shutdown hasn’t happened since the winter of 1995-1996 — my last year as a Clinton appointee at HCFA, now CMS.   The shutdown was a 2-part ordeal, lasting 5 days in November 1995 and another 21 in December 1995 and January 1996. Medicare continued to pay physicians and hospitals during the shutdown, and the ability to reimburse providers and plans was never in question, because claims are paid out of Medicare trust funds that are separate from Congressional appropriations.

However, payments to CMS’s Medicare vendors for claims processing comes from the CMS operating budget, which — unlike the trust funds — is vulnerable to Congress turning off the spigot. Therefore, in 1995 and 1996, CMS’s claims vendors processed and paid claims on a credit basis, with the expectation of being made whole later.  An HHS official warned during a Congressional hearing on the 1995-1996 shutdown that Medicare claims vendors “would have to cease Medicare payments if their cash ran out due to a longer hiatus.” So if the shutdown — or worse, a debt ceiling crisis, where the government can only spend dollars as they are collected — were to last for many months, Medicare fee-for-service benefits and payments to providers would stop. Health plans are paid on the 1st of the month, so as long as a shutdown or debt ceiling breach doesn’t exceed 30 days, there should be minimal disruption to cash flow.

Most in Washington expect Medicaid’s core functions to continue unimpeded during a shutdown — as long as it’s fairly short. “According to the House Committee on Energy and Commerce, because Medicaid allotments are paid to states in advance on a quarterly basis, it is likely states will not see an immediate impact from a temporary government shutdown,” Rep. James Renacci (R-OH) said in last year’s shutdown bulletin on his website. That means physicians and other healthcare providers should continue to be paid as usual as they serve the Medicaid and SCHIP (State Children’s Health Insurance Program) populations. If Congress runs up to the midnight deadline with no plan to fund the government, federal agencies including CMS must designate which workers are performing essential work. Those people would be asked to stay on the job, while nonessential workers would be furloughed. It’s unclear if furloughs might have ripple effects for some Medicaid services, such as enrolling new beneficiaries for coverage.

So, short answer: both entitlements are likely to continue to operate and administer benefits and payments during a government  shutdown — but only if it’s brief.  If a political impasse occurs and a shutdown or debt ceiling breach stretches into weeks or even months, it’s anybody’s guess what happens to Medicare and Medicaid.  And if there’s disruption to payments, for even a few weeks, the economic and healthcare consequences will be severe.

And as we’ve said before, the biggest casualty of this legislative train wreck may be the doc pay fix.  Congress made significant bipartisan progress on the Medicare physician payment fix of the flawed “sustainable growth rate” formula which will cut 30% in 2014 unless offset.  While the cost of a long-term fix was recently reduced (~$150B vs. $300B) and raised hopes for a deal, it will now get thrown into this latest manufactured budget disaster.  This is significant for Medicare Advantage because a long-term doc fix means MA rates go up about 6-7%; no fix, no boost.  So, ironically, physicians and beneficiaries end up at the short end of Washington dysfunction again.

In this next 4 weeks I think we’re going to see the beginning of the end of Boehner’s speakership, and the rift down the middle of the GOP break wide open.  All because of blind, insane opposition to ObamaCare.  But at least the loyal opposition is “sticking to its principles.”

The utter irrationality of the Republican party is evident when u consider that neither a government shutdown nor a debt ceiling breach will stop the Obomacare train.  In a recent article, the Congressional Resource Service revealed that if the government were shut down, “funding for Obamacare would still continue.”



Join us on Oct. 1 and hear Gorman Health Group’s Chief Sales and Marketing Officer, RaeAnn Grossman, outline the components of a successful risk-adjustment program.

Get an in-depth look at the just-released 2014 star ratings and their implications for your organization, from GHG Senior Vice President, Pharmacy Services, Deb Devereaux, Chief Development Officer, Aaron Eaton, and Senior Vice President, Clinical Services, Jane Scott.
John Gorman

About John Gorman

Under John’s leadership, Gorman Health Group has become the leading professional services and solutions firm for government-sponsored health care, providing thought leadership and expert strategic, operational, and technology-based solutions. Read more

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