Budget struggle raising anxiety for health care

Medicare service providers would get hit with a 2 percent across-the-board cut, but Medicaid and subsidies for the uninsured under Obama's health care overhaul would be spared. The Medicare cut adds up to about $120 billion over ten years, with 40 percent falling on hospitals, according to Avalare's analysis. Nursing homes, Medicare Advantage plans and home health agencies also get hit.

The American Hospital Association says that would lead to the loss of hundreds of thousands of hospital jobs in a labor intensive industry that also generates employment for other businesses in local communities.

"It's very difficult to believe hospitals can absorb the kinds of numbers they are talking about without reducing service or workforce," said Kirby, the hospital association head. "You may decide that a service a hospital provides is not affordable — for example, obstetrics in a rural community — if you're making a little bit of money or losing a little bit of money by continuing to deliver babies in a rural community."

Independent analysts like Mendelson doubt that a 2 percent Medicare cut to hospitals would be catastrophic, but say it will cost jobs somewhere.

Even if there is a budget deal, the squeeze will be on.

The administration has proposed $400 billion in health care cuts so far in the budget talks, coming mainly from Medicare spending. That's only a starting point as far as Republicans are concerned. They also want to pare back Medicaid and Obama's health care law, and have also sought an increase in the eligibility age for Medicare.