The impacts could be significant.

John D. Stobo

By John D. Stobo and Santiago Muñoz

The federal debt deal signed into law Tuesday (Aug. 2) could have significant impacts on UC Health’s five medical centers and 16 health professional schools. While all the details won’t be determined until the end of the year, here’s what we know.

In exchange for raising the national debt limit by at least $2.1 trillion, the federal government must cut spending by a similar amount in two steps. The first step immediately enacts 10-year discretionary spending caps designed to reduce the deficit by $917 billion. Medicare and Medicaid are exempt from cuts in this round, but health care workforce training programs and National Institutes of Health research funding will be reduced.

The next round of cuts will be $1.2 trillion to $1.5 trillion, depending on what a 12-member bipartisan congressional committee decides. This so-called “super committee” must produce its deficit-reduction proposal by Nov. 23. Everything will be on the table, including cuts to Medicare and Medicaid. Congress must vote on the proposal by Dec. 23, after which the president will either approve or veto it. But if the congressional effort fails, $1.2 trillion in spending cuts will automatically kick in. These include a 2 percent reduction in payments to Medicare providers starting in 2013.

Santiago Muñoz

That 2 percent Medicare cut could exceed $130 billion over 10 years. And depending on how the cuts are distributed, they could fall disproportionately on teaching hospitals such as UC medical centers.

UC Health is one of the largest providers of Medicare and Medicaid health care services in California, with a significant concentration of services often unavailable to patients in their local communities. UC Health relies heavily on Medicare and Medicaid payments to support its mission to teach, research and provide care to all Californians. This money accounts for over a third of UC medical center revenue – more than $2 billion a year.

Medicare funding for training physicians has been a key focus for discussions on how to reduce federal spending. One proposal called for a $60 billion cut over 10 years in Medicare support for graduate medical education. For UC, which trains nearly half of California’s medical residents, that cut translates to some $900 million over 10 years. UC would be forced to eliminate at least 600 medical resident positions, which would mean 420 fewer doctors entering the California health care workforce each year.

Moreover, the effects would ripple through the economy and undermine teaching hospitals’ efforts to provide vital services such as burn, cancer and trauma care.

UC Health recognizes that federal spending cuts are coming and has embraced the challenge of making difficult budget decisions while maintaining the highest standards of patient care. Each year we absorb significant underpayments by Medicare and Medicaid to help ensure health care access for California’s medically vulnerable. We have championed the federal government’s call for more accountability and improved clinical outcomes – notwithstanding the underfunding or the hundreds of millions of dollars we will not be paid unless we demonstrate increased value. Also, we have invested heavily in unearthing and spreading cost-saving innovations throughout our health system. Our new Center for Health Quality and Innovation holds enormous promise to attain these goals.

UC Health will continue to assess the situation and keep you informed. Californians have much at stake during this dialogue, including our health care infrastructure, which at its core includes UC Health.

John D. Stobo, M.D., is senior vice president for UC Health Sciences and Services. Santiago Muñoz is associate vice president – chief strategy officer for UC Health Sciences and Services.