Automatic Funding Cuts Imminent for Health Organizations

Endocrine Society members who receive research grants from the federal government or care for Medicare patients face uncertainty in the near future regarding their funding due to an impending deficit cutting process known as sequestration. The Endocrine Society has taken an aggressive stance against these cuts, and is working directly with members of Congress to illustrate the impact of these cuts on researchers, physicians, and patients.

In 2011, Congress passed the Budget Control Act (BCA), which established caps on defense and nondefense discretionary (NDD) programs, including research funding and Medicare, that will reduce this funding by $1 trillion over 10 years. The BCA also created the Joint Select Committee on Deficit Reduction to develop a plan to reduce the deficit by another $1.2 trillion over the same period. In the event the Committee failed to come up with a viable plan, the BCA established “sequestration” as an incentive to force bipartisan compromise. A rigid budgetary tool, sequestration will force automatic, across-the-board cuts of another $1 trillion to nearly all government programs, including public health. Because the Committee has failed to produce an agreement, sequestration is scheduled to begin on January 2, 2013.

Estimates of the impact on individual federal agencies vary from 7.8 percent to 9.1 percent. The Federation of American Societies for Experimental Biology (FASEB), of which the Society is a member, offers an illustration of the impact to the National Institutes of Health based on fiscal year 2012 levels if a 9.1 percent cut were to be implemented. With a fiscal year 2012 budget of $30.8 billion, a 9.1 percent reduction to NIH’s budget would be $2.8 billion. Cutting this amount from the NIH budget would be difficult and highly disruptive to ongoing efforts.

Moreover, not every activity can be reduced by 9.1 percent. For example, salary costs for federal employees cannot be reduced with the speed mandated by BCA. Some NIH activities, such as the intramural program ($3.4 billion), research management and support ($1.5 billion), and the Office of the Director ($0.6 billion), consist largely of salary expenses. If these activities (totaling $5.5 billion) are not subject to immediate reduction, then NIH would have to take $2.8 billion from the remaining extramural budget ($25.3 billion), which will require a reduction of 11.1 percent of extramural programs. Other organizations of which the Society is a member, including United for Medical Research and Research!America, have completed similar analyses with equally stark results. The Of- fice of Management and Budget has estimated that NIH would issue 700 fewer grants in fiscal year 2013 than in the previous year.

The Medicare program would also be impacted by spending cuts resulting from the sequestration process. While Medicare benefits to patients would not be subject to budgetary cuts, healthcare professionals, including endocrinologists, would receive a 2 percent annual payment reduction from 2013 to 2021 in addition to an almost 30 percent reduction in reimbursement if Congress fails to pass a solution to the flawed sustainable growth rate formula by January 1, 2013. It is anticipated that a short-term fix will be passed to prevent the SGR cuts from taking effect.

The Society, however, will continue to actively engage lawmakers on Capitol Hill to pass a permanent solution that will address the needs of endocrinologists and other medical specialists. The organizations representing the interests of agencies funded through discretionary spending are working together to stop additional cuts to these programs. The Society is engaged in this large effort that extends beyond biomedical research and Medicare, and is meeting with members of Congress to advocate for a balanced approach to deficit reduction.

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