To Cut Deficit, Obama Takes A Scalpel To Health Programs

President Obama’s plan to cut the deficit doesn’t exactly spare Medicare, Medicaid, and other federal health programs. But he also doesn’t propose the sweeping sorts of changes envisioned by House Republicans earlier this year.

The proposal to reduce the deficit by an additional $3 trillion over the next decade includes spending reductions of some $320 billion in Medicare, and $73 in Medicaid and other health programs, the vast majority of it from health care providers, not beneficiaries.

The biggest cuts would come in what Medicare pays for prescription drugs in the future.

But the president made clear that he doesn’t intend to make any health cuts unless the Republicans relent on their pledge against new revenues.

“I will veto any bill that changes benefits for those who rely on Medicare but does not raise serious revenues by asking the wealthiest Americans or biggest corporations to pay their fair share,” he said in remarks in the White House Rose Garden. “We are not going to have a one-sided deal that hurts the folks who are most vulnerable.”

Still, the proposal does backtrack, at least somewhat, on vows by Democrats from earlier this year not to touch Medicare beneficiaries.

Under the heading “Create Incentives for Use of High-Value Services,” the proposal includes several highly controversial plans that would increase out-of-pocket beneficiary costs, although none for current Medicare enrollees.

For the first time, for example, there would be a copayment for the use of home health services not preceded by a hospital or other inpatient stay. There would also be a new premium surcharge on Medicare beneficiaries who purchase private supplemental insurance (known as Medigap coverage) that provides so-called first dollar coverage.

Some economist say such policies encourage the overuse of services, since beneficiaries face no out-of-pocket costs once their premiums are paid. Such plans have been popular, though, because many seniors, living on fixed incomes, like the security of knowing exactly how much they will spend each year on healthcare.

That’s not sitting well with groups like the AARP. “We urge the Administration and Congress to reject any health care proposals that would cut seniors benefits, raise out of pocket costs, and threaten long-term care services for millions of older Americans and persons with disabilities,” said Nancy LeaMond, the group’s Executive Vice President, in a statement.

On the other hand, other portions of the plan are sure to go over less than well with the GOP. That includes another push to shorten the extended market exclusivity granted to the original developers of biotech drugs in the Affordable Care Act. It also might cover an originally bipartisan proposal the President offered back in February, to move up the date states could start experimenting on their own with alternate ways to expand health insurance to their residents, from 2017 to 2014.

Since then, however, the only state that appears ready to take the federal government up on that offer is Vermont, which in May enacted a proposal to launch a program that’s intended to lead towards a fully-government run system.

Republicans, however, rather than criticizing the specifics of the proposal (many of which they have embraced in the past) instead pointed out that the plan failed to include ways to pay for the fix to the system Medicare uses to pay doctors, the $300 billion-plus that will be needed to avert a 29 percent cut to physicians who treat Medicare beneficiaries starting next Jan. 1.

“Virtually all of the president’s health care deficit reduction will be wiped out – unless Congress allows Medicare physician payment rates to be cut by 30 percent this January,” said the talking points distributed by the Senate Republican Policy Committee.

On a conference call with reporters, senior White House health officials said their baseline assumes that the Medicare physician cuts will not take effect and they plan “to work with Congress” to find a way to make up the lost revenue to the program.

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