President Obama is proposing to cut more than $370 billion from the Medicare program over the next decade, a move aimed at reducing the federal deficit and putting the program on firmer financial footing.
The president’s fiscal year 2014 budget proposal, sent to Congress April 10, includes cuts for physicians, drug companies, hospitals, and long-term facilities, as well as increased cost-sharing for some Medicare beneficiaries.
The part of the budget with the potential to have the biggest impact on doctors is the increased authority for the Independent Payment Advisory Board (IPAB). The 15-member board was created under the Affordable Care Act (ACA) and is charged with recommending to Congress how to reduce spending growth in Medicare. Under current law, IPAB would make recommendations only if the projected Medicare per capita growth rate exceeded the gross domestic product (GDP) plus 1%. In the president’s budget proposal, that target would be triggered early, when Medicare spending was projected to exceed GDP plus 0.5%.
| Source: U.S. Dept. of Health and Human Services |
This change is projected to save the federal government $4.1 billion over the next decade.
The bulk of the Medicare savings will come from proposals to cut payments to drug companies, long-term care facilities, and increases in cost sharing by beneficiaries.
For instance, the administration estimates it will save about $123 billion over 10 years by allowing the Medicare Part D program to pay the lower Medicaid rate for prescription drugs for its low-income beneficiaries.
A change involving post–acute care providers would save $79 billion. The administration wants to reduce the market basket updates for inpatient rehabilitation facilities, long-term care hospitals, skilled nursing facilities, and home health agencies by 1.1% starting in 2014 and running through 2023.
Beneficiaries also would contribute more for their Medicare premiums under the Obama budget proposal. Starting in 2017, certain Medicare beneficiaries will pay more for their Part B and D premiums, which is expected to generate $50 billion in savings over 10 years.
The budget also includes about $22.1 billion in cuts to Medicaid over 10 years.
The budget also includes a little good news for physicians: It assumes that the Congress will eliminate the Sustainable Growth Rate (SGR) formula used in setting Medicare physician payments.
The American Medical Association praised the administration for its commitment to move toward new ways to pay for health care. "The President’s proposals align with many of the principles developed by the AMA and 110 other physician organizations on transitioning Medicare to include an array of accountable payment models," Dr. Jeremy A. Lazarus, AMA president, said in a statement. "It is critical for physicians to have a period of stability and the flexibility to choose options that will help them lower costs and improve the quality of care for their patients. We are encouraged that the president and members of Congress are focused this year on eliminating this failed formula and strengthening Medicare for patients now and in the future."
The cost-cutting proposals aren’t new; President Obama included some of them in last year’s budget proposal. He also called for cuts to Medicare when negotiating for a deficit reduction deal with House Speaker John Boehner (R-Ohio) late last year.
President Obama said his proposed budget would lower the federal deficit in a "balanced way," allowing more targeted cuts to replace the across-the-board budget cuts set out in the sequester, which took effect in March. Overall, the Obama administration estimates that the new budget would achieve $1.8 trillion in deficit reduction over the next 10 years.
But the budget is already getting a cool reception from Republicans on Capitol Hill. House Budget Committee Chairman Paul Ryan (R-Wisc.) said that after eliminating the sequester, there is only about $119 billion in deficit reduction over the next decade in the president’s proposed budget. "I’m disappointed by the president’s proposal because it merely ratifies the status quo," Rep. Ryan said in a statement. "It doesn’t break new ground; it goes over old ground."
Both the House and the Senate have already passed their own budget proposals for fiscal year 2014.
In addition to the Medicare and Medicaid cuts, the President’s budget offers some targeted increases.
For instance, the Centers for Medicare and Medicaid Services is seeking about $1.5 billion in new funding to help support operations and outreach related to the ACA’s health insurance exchanges. The funds would support the federally operated exchanges and offer assistance to states that are running their own exchanges. The exchanges will open for enrollment on Oct. 1, 2013, the first day of fiscal year 2014. Coverage under the exchanges is set to begin on Jan. 1, 2014.