Why the US debt ceiling breach could be catastrophic for hospitals

The full effect a U.S. debt ceiling breach would have on healthcare is unknown but, Sara Rosenbaum, emerita professor at George Washington University in Washington, D.C., told Barron's on May 12 that "If the federal government can't pay the bills, the entire thing stops. The whole health system collapses." 

With June 1 — the date Treasury Secretary Janet Yellen called the "X date" when the federal government would run out of money to pay its bills if Congress and President Joe Biden do not come to a compromise — only a couple of weeks away, analysts said they are looking at a worst-case scenario. Moody's put the possibility of a breach at 10 percent but also noted "a lengthy standoff no longer has a zero probability." 

"It's Congress' job to do this," Ms. Yellen told ABC on May 7. "If they fail to do it, we will have an economic and financial catastrophe that will be of our own making, and there is no action that President Biden and the U.S. Treasury can take to prevent that catastrophe."

It is possible payments to Medicare and Medicaid payments could stop right away and the "trickle-down implications would eventually make their way through the medical system, worsening the longer the situation continued," the Barron's article said.

That said, "For at least a month, maybe two months, hospitals and doctors offices and other providers would continue to get payments from the Medicare program, but for services that they provided potentially months ago," Joseph Antos, PhD, senior fellow at the American Enterprise Institute, told The Hill on May 18.

"Medicare is the financial backbone of our healthcare system, so the consequences to hospitals and healthcare providers will be profound," Katherine Hempstead, PhD, senior policy adviser at the Robert Wood Johnson Foundation, told The Hill. "Social Security and Medicare are major sources of federal expenditure, and in most scenarios, they will be impacted." 

Even in the short term, depending on how much cash hospitals have to sustain themselves, a Moody's Analytics report said smaller hospitals, especially those in rural areas, would be affected immediately. All hospitals throughout the country might be forced to concentrate on providing emergency services and even consider canceling elective procedures if CMS payments stop.

The American Hospital Association declined to comment when contacted by Becker's.

A CMS spokesperson told The Hill that "even approaching default could damage the economy, as we saw in 2011. While the precise impact on CMS' programs depends on many uncertain factors, it is clear that if the federal government is prevented from making good on its promises, there would be significant consequences for Medicaid, Medicare and the Affordable Care Act marketplaces."



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