Debt Ceiling Debate Puts HME in Perilous Spot

This analysis was written by the American Association for
Homecare’s lobbying firm, Mehlman Vogel Castagnetti Inc.

Without congressional action by August 2, 2011, the United
States will exceed its statutory borrowing authority. While most
expect that Congress will raise the current $14.3 trillion debt
ceiling, Republicans in Congress plan to use the debt limit debate
to pursue strategies to reduce the nation’s federal deficit and
debt.

On May 31, the House of Representatives held a vote that
underscored this point. Republicans in the House put forth
legislation that would have implemented President Obama’s request
to increase the statutory debt limit without any reductions in
government spending. The bill (H.R. 1954) failed by a vote of
318-97. Nearly half of the House Democrats voted with all
Republicans in a preemptive strike to demonstrate the lack of
support for a “clean” debt limit increase. Thus, it is clear that
any vote in Congress to increase the debt limit will have to be
accompanied by significant corresponding reductions in government
spending.

The venue for reaching a potential agreement to simultaneously
raise the debt ceiling and curtail government spending are
discussions being hosted by Vice President Joe Biden. The House and
Senate leadership all have appointed representatives to participate
in these bipartisan, bicameral negotiations.

It has become increasingly clear that the bipartisan discussions
led by Biden are the center of gravity on budget negotiations. On
May 17, Republican Senator Tom Coburn (R-Okla.) abandoned the “Gang
of Six” effort saying he could not support the direction that the
group was heading. Reportedly, Senator Coburn believed that the
group would not embrace deeper reductions in health care
entitlement programs that he viewed as critical to his support. The
remaining members are Senators Saxby Chambliss (R-Ga.), Mike Crapo
(R-Idaho), Mark Warner (D-Va.), Kent Conrad (D-N.D.) and Dick
Durbin (D-Ill.). They continue their meetings to draft legislation
based on the recommendations of President Obama’s fiscal
commission. But with Senator Coburn’s departure, the group is much
less likely to have any impact.

There are three potential outcomes of the ongoing budget debate.
Under any of these scenarios, there is likely to be an impact on
Medicare and/or Medicaid programs because these health entitlement
programs are such a big part of the federal budget.

The first scenario is the “Grand Bargain.” Under this scenario,
Republicans would agree to a framework that included revenue
increases and Democrats would agree to accept major spending
reductions, including to sacrosanct programs such as Medicare,
Medicaid and Social Security.

The second scenario would be for no agreement to be reached and
for the United States to breach the debt limit and default, at
least temporarily, on the country’s debt service obligations. Both
of these scenarios are possible, but highly unlikely.

A third, more likely, scenario, would include some immediate
savings from entitlement and other programs, additional reductions
to discretionary spending programs and some sort of statutory
limits on future spending that would lead to automatic spending
reductions in future years.

For the home medical equipment (HME) sector, there are both
risks and opportunities in these discussions. On the one hand, the
negotiations could provide a framework for Medicare reforms that
would be a legislative vehicle to halt the harmful competitive bidding program.

On the other hand, an agreement to make deep reductions to
government health care programs could make repeal more difficult.
The need to find billions if not trillions of dollars in government
savings could put HME reimbursement cuts on the table in the
negotiations. Those cuts might include reductions to home oxygen
payments or the proposal from President Obama earlier this year to
pay for HME under state Medicaid programs at the lower Medicare
rates that result from the bidding program.

Note from AAHomecare: What You Can Do

What this means is the HME sector will need to remind
lawmakers about the cost-effectiveness and value of home medical
equipment and home-based care. Visit the Take Action Center at
www.aahomecare.org.