The Specifics: How Obama plans to cut health programs by $320 billion
Washington, DC, United States
September 19, 2011 02:15 pm EDT
Health, Healthcare Policy
In his plan to trim the federal deficit, President Barack Obama Monday proposed $320 billion in cuts to Medicare and Medicaid, largely by changing how the federal government pays health providers, slashing payments to drug companies, and dramatically changing the way it splits the costs of Medicaid with the states, according to a fact sheet the White House released today.
The biggest cut to Medicare requires pharmaceutical companies to lower their rates. The proposal would save Medicare an estimated $135 billion over 10 years starting in 2013. The change would allow the federal government to receive the same brand name and generic rebates for low-income Medicare patients as is provided to Medicaid beneficiaries.
The cuts to the major health entitlement programs are part of a White House plan to reduce the federal deficit by more than $3 trillion over the next 10 years. The plan is the administration’s opening move in negotiations on deficit reduction to be taken up by the joint House-Senate “super committee” over the next two months. If a deal is not enacted by Dec. 23, cuts could take effect automatically across government agencies.
The administration also is proposing cutting $3.5 billion from a fund created by the health law to improve disease prevention and to promote public health while keeping $13.8 billion.
Some Medicare beneficiaries would see costs go up under the president’s plan. For the first time, beneficiaries receiving home health services would pay a $100 co-payment per treatment episode starting in 2017, which would raise $400 million over 10 years.
The Medicare Part B (physician costs) deductible would increase by $25 in 2017, 2019 and 2021 for new beneficiaries, raising $1 billion over the next decade.
Starting in 2017, new beneficiaries who buy a Medigap policy that leaves them with little out-of-pocket costs would pay a 15 percent surcharge on that policy. Critics have argued such Medigap plans lead to excess use of health services and raise health spending. The change would net the feds $2.5 billion over 10 years.
Higher income Medicare beneficiaries would pay higher premiums for Medicare Part B premium and Medicare prescription drug plans, raising $20 billion over 10 years.
One of the biggest changes proposed by Obama is how the federal government splits the cost of Medicaid with states, at a proposed savings of $14.9 billion over 10 years.
Currently, states and the federal government share the cost of Medicaid, with the federal government paying about two-thirds and the states one third of the total national spending. The percentage varies by state based on the wealth of each states, with poorer states getting a higher match rate.
Obama is proposing that beginning in 2017, each state will be paid the same rate, but from 2014 through 2016, states with a higher enrollment rate would get a higher rate. The idea is to give states incentives to enroll more people starting in 2014 when the health law expands Medicaid. An additional 16 million people will be eligible for Medicaid starting in 2014.
Among the hardest hit providers in the Obama plan would be so-called post acute health providers— nursing homes, long-term care hospitals, rehabilitation facilities and home health facilities—which would see $42 billion in cuts over ten years.
- Provided by Kaiser Health News.
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