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Emory takes action to manage fiscal cliff threats

The economy reportedly shrank 0.1 percent at the end of 2012, because of declining government spending. This is especially sobering news as Congress faces a pair of funding cliffs that threaten to further reduce federal spending and dampen our nation’s economic recovery.

Despite passage of the American Taxpayer Relief Act of 2012 (the fiscal cliff deal) earlier this year, the threat of automatic spending reductions, known as "sequestration" looms again in March.  This time the potential cliff comes with the expiration of the Fiscal Year 2013 Appropriations Continuing Resolution (CR).

In order to stave off these automatic spending cuts for another six months, Congress must agree to $85 billion in spending cuts.  Over the next decade, over $1 trillion in spending cuts are necessary to completely eliminate sequestration.   

Such a deficit reduction agreement remains elusive. Democrats believe that tax revenue raisers should go hand-in-hand with spending reductions.  Republicans, however, believe that the recent fiscal cliff deal fulfilled the need for increased tax revenue. Because of this deadlock, the White House Office of Management and Budget has directed federal agencies to plan for the $85 billion in spending reductions in FY2013.  

Sequestration remains a major concern for Emory.  The following federal funding is at high risk this year:

  • An automatic 2 percent sequester reduction in Medicare provider payments is estimated to cost Emory hospitals $9 million and Emory’s physicians $2.7 million a year.

  • All research funding, including the National Institutes of Health (NIH), could be reduced by 5.1 percent to 6.4 percent in a sequester, with a potential $29 million annual loss in Emory’s research funding

  • The Student Aid Alliance estimates that the sequester could translate into a loss of $765 a year for each of our students on federal financial aid in 2013-2014.

  • Cutting federal support for graduate medical education has been proposed in various deficit reduction plans (e.g., the Simpson Bowles plan), which could cost Emory Healthcare $2.01 million in Graduate Medical Education payments and $3 million in Indirect Medical Education payments annually.

  • The offset for the one-year physician payment fix is estimated to cost Emory Healthcare $15.5 million over the next three years. Health care service payments remain at risk as Congress looks to pay for health services with cuts within the health care sector.

  • While the Pell grant program is protected from sequestration, it will experience a funding shortfall in the future, and there is concern about how Congress will pay for it in the long term.

The expiration of the FY2013 Appropriations Continuing Resolution on March 27 will further complicate the sequester. Some insiders believe that a second six-month CR, maintaining FY2012 funding levels (i.e., flat funding), will be passed perpetuating the negative impact on research, health care, and education funding.  

Emory has been active on several fronts. President James Wagner joined 150 university presidents in a letter sent to Capitol Hill last summer, expressing support for a comprehensive deficit reduction plan that encompasses tax and entitlement reform, and does not rely solely on savings to federal discretionary spending. In every meeting, we continue to urge our members of Congress to find a solution that both addresses our long-term deficit reduction goals and maintains our nation's wise long-term investments.   

Emory has produced a short video on the negative impacts of sequestration. This was in conjunction with The Science Coalition, the mission of which is to expand and strengthen the federal government’s investment in university-based scientific research.  

Emory has utilized coalition-building as a successful advocacy tool, and we have been particularly active on behalf of graduate medical education, the NIH, and preservation of the charitable deduction. Chaired by Emory's Woodruff Health Sciences Center and Johns Hopkins Medicine, the Academic Health Center (AHC) Working Group is comprised of 20 of the nation’s top academic medical centers.   

Emory has become a respected partner on the Hill. For example, after being asked by congressional decision-makers for concrete budget saving ideas, Emory drafted, and shared with several U.S. Senate offices, an assessment of our health care administrative bureaucracy and how program modifications can reduce health care costs.  

With these two fiscal cliffs looming, February will be a busy month for Emory on Capitol Hill. Our AHC Working Group will be making the rounds three times this month to talk with decision-makers about the serious consequences that indiscriminate cuts will have on the future of our health care workforce, as well as our patients and researchers. In addition, President Wagner and WHSC CEO Wright Caughman will meet with Labor-HHS Appropriations Chairman Jack Kingston (R-Ga.). His subcommittee is responsible for all federal health and education funding, which includes, for example, NIH and Pell grant program funding.   

Emory will continue to advocate on behalf of the unique and critical federal-university partnership that is invaluable to our nation’s long-term health and economic goals. These federal investments would be much easier to fund if the cliffs were eliminated.

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