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.