President Outlines Cuts to Medicare, Medicaid To Help Cover Reform Costs

With previously proposed cuts, the administration has proposed nearly $950 billion in spending cuts and tax increases to fund a health care overhaul.Â

Obama said, "Any honest accounting must prepare for the fact that health care reform will require additional costs in the short term in order to reduce spending in the long term."

He said that the additional cuts "will rein in unnecessary spending and increase efficiency and the quality of care," adding, "These savings will come from common sense changes" (Meckler, Wall Street Journal, 6/15).

Obama continued, "I know some question whether we can afford to act this year. But the unmistakable truth is that it would be irresponsible to not act. We can't keep shifting a growing burden to future generations" (Silva, "The Swamp," Chicago Tribune, 6/13).

Proposals

The proposed savings include:

$110 billion by making across-the-board "productivity adjustments" to Medicare payment increases. The proposal would slow projected increases in Medicare payments to hospitals and other providers, excluding physicians, to promote more cost-effective care;

$106 billion by reducing subsidies for hospitals that provide care for the uninsured as more people gain coverage. Payments would be slowed beginning in 2013 and by 2019, payments would be 25% of what hospitals received in 2013; and

The administration is aiming to hold the cost of health reform at about $1 trillion, and Obama has said the overhaul cannot contribute to the federal deficit.

White House Office of Management and Budget Director Peter Orszag said the $950 billion worth of savings that the administration has identified "is in the ballpark of many of the [health care] proposals floating around," and "there may well be some additional resources that are necessary" (AP/USA Today, 6/13). He said that the additional savings proposed by Obama are an "unprecedented" effort to "put down in such clarity how reform will be financed" (Montgomery/Wilson, Washington Post, 6/14).

According to Orszag, the administration soon will announce several possible policy changes to achieve these savings (Meckler, Wall Street Journal, 6/15). All together, the Medicare savings would extend the solvency of the trust fund by seven years until 2024, according to Orszag (Levey, Los Angeles Times, 6/14).

In addition, the cuts would have the effect of lowering premiums for Medicare Part B beneficiaries by $43 billion over 10 years (Meckler, Wall Street Journal, 6/15).

Congressional Reaction

In a statement Saturday, Senate Finance Committee Chair Max Baucus (D-Mont.) said, "We are examining a wide range of options as we work with the president to craft bipartisan legislation that can become law this year," adding that he applauded Obama's "commitment to our shared goals of lowering health care costs and ensuring quality, affordable care for all Americans."

However, aides on the Senate Finance Committee and House Ways and Means Committee on Saturday said that Obama's new proposals would "raise some hackles" and spur "some pushback" (Washington Post, 6/14).

House Minority Leader John Boehner (R-Ohio) said that although Medicare and Medicaid reform is needed, "serious changes should not be rushed through Congress as part of a new government-run program that will raise taxes and make health care more expensive" (AP/Kansas City Star, 6/13).

Industry Reaction

Alicia Mitchell, a spokesperson for AHA, said, "We are disappointed to see cuts of this magnitude to hospitals, especially in these tough economic times."

The Pharmaceutical Care Management Association said that "there are several policies that can accomplish [savings] without restricting access to medications or shifting costs onto those who already enjoy drug benefits in private sector plan[s]" (Meckler, Wall Street Journal, 6/15).

American Hospital Association President Richard Umbdenstock issued a call to action to members saying that lawmakers might cut provider payments and asking hospitals to "push back" against the proposed cuts because "blunt cuts ... cripple hospitals' ability to do better for their patients" (Stolberg/Pear, New York Times, 6/14). He said, "We're certainly disappointed," adding, "It will be very, very difficult for hospitals to live with cuts of that magnitude."

The Access to Medical Imaging Coalition said that the proposed cuts "will impair access to diagnostic imaging services and result in patients' delaying or forgoing [life- and cost-saving] imaging procedures" (Adamy/Rockoff, Wall Street Journal, 6/15).

On Saturday, AARP said that it "agrees that there are ways we can eliminate wasteful spending and inefficiencies from Medicare -- such as reducing preventable hospital readmissions or overpayments to drug companies -- that will actually improve care and strengthen the program."

In a statement, AARP Senior Vice President for Government Relations and Advocacy David Sloane said, "We want to make certain that any Medicare savings proposals will reduce beneficiaries' premiums and deductibles so that our members realize real savings in their own out-of-pocket spending, which has been increasing at a rapid rate," adding, "At the same time, we also believe that some of these savings should be reinvested in filling the gaps in Medicare coverage" (Washington Post, 6/14).

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