Type the word sequester or sequestration into your search engine and then stand back as the flood gates open.   

"What exactly is sequestration?" you may ask.   Basically, sequestration is a word used to describe the employment of automatic, across-the-board spending cuts in the federal budget in the face of annual budget deficits.  And like just about everything else, there are provisions for exceptions.

Interestingly, the idea of imposing automatic spending cuts in the federal budget was first authorized by the Balanced Budget and Emergency Deficit Control Act of 1985.  It was applied again by Congress through the Budget Control Act of 2011 and the American Taxpayer Relief Act of 2012. 

The sequester cuts were triggered when President Obama and Congress failed to reach an agreement on a total of $1.2 trillion in cuts to federal spending over the next 10 years.

Without getting into the politics of it all, the sequester officially began on March 1, 2013. However, its effects are still unfolding as the cuts kick in.  For example, Medicare provider and insurer payments have been cut by 2 percent as of April 1. The cuts apply to provider payments for services administered under Medicare Hospital Insurance (Part A), Medicare Medical Insurance (Part B), the contractual payments to Medicare Advantage Plans (Part C), and Medicare Prescription Drug Plans (Part D), according to the Congressional Budget Office. Providers that offer Medicare Part C and Medicare Part D plans felt the effect of the cuts immediately as Medicare pays these providers on the first business day of every month--the majority of health care providers won't feel the pain until weeks or even months after the budget cuts technically go into effect.

Since the cuts are made across-the-board, the effects of the 2 percent reduction to Critical Access Hospitals (CAH) may push many of these health care facilities into dire circumstances. According to the National Rural Health Association, Medicare contributes an average of $5 million to each CAH's net patient revenue. Even though these dollars make up only 2% of the total Medicare budget, these essential dollars can equal 30% of a CAH's revenue.

Hospitals aren't alone in these cuts; sequestration will slash thousands of dollars from physicians treating the elderly.  Unless changes are made within their practices, many physicians may be forced to choose between putting their practices at risk and reducing the number of elderly and disabled patients they treat.

The cuts will undoubtedly cause job losses in the health care industry.  According to the Medicare Newsgroup, in the first year of the sequester it is estimated that health care and its related industries will lose more than 496,000 jobs.

Health care is not the only industry hit with these federal budget cuts.   According to a report by the state Department of Public Instruction, Wisconsin stands to lose $40.8 million in federal funding this year for education programs, including Head Start, special education and grants to districts with large low-income student population.  The White House estimates Wisconsin could lose $8.5 million in primary and secondary funding this year.

We've heard that the sequester will have impact on the Military.  Active-duty military personnel are exempt from the cuts, but there are many civilian Department of Defense employees here in Wisconsin that would likely be affected by receiving furlough days. Plans are still being finalized, but affected employees would have to take 22 furlough days from April through September.

According to the White House, Wisconsin could lose about $3.9 million in funding for clean air and water programs as well as programs that are aimed at preventing pollution from pesticides and hazardous wastes. The White House data states Wisconsin could also lose as much as $1.5 million in grants for fish and wildlife protection.

This is just a sampling of what the so-called sequester could mean to us and only time will tell for sure.  Even if your business isn't personally hit by these cuts, the trickle down effect could possibly impact you. Unless you tackle sequestration head on, your revenue will most likely take a hit. Now is the time to be proactive and get the necessary processes and changes in place to turn this problem into an opporturnity.

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