President Obama announces budget framework with more than $1.4
trillion in healthcare cuts
During an April 13 speech, President Obama announced his plan
to reduce the deficit by $4 trillion in 12 years or less that
includes $480 billion in Medicare and Medicaid cuts by 2023 and at
least an additional $1 trillion over the subsequent decade. Obama
unveiled his budget framework in response to the budget proposal
that House Budget Committee Chairman Paul Ryan (R-WI) released last
week that would shave $6 trillion in spending cuts over 10 years, a
large portion of which would be achieved through cuts to Medicare
Outlined in Obama’s framework are the following healthcare
- Changes to Medicaid: Obama proposes to replace the
current federal matching formula for Medicaid and the Children's
Health Insurance Program (CHIP) with a single matching rate for all
program spending that would be linked to states' efficiency. The
proposal would also automatically increase the matching rate if
states' costs rise due to increased enrollment during a recession.
In addition, the president pledges to examine recommendations from
the National Governors Association and to support reforms "to
incentivize more efficient, higher quality care for high-cost
beneficiaries," including those that target dual-eligibles.
- Independent Payment Advisory Board (IPAB): The proposal
would set a new lower target of Medicare growth per beneficiary to
GDP per capita plus 0.5 percent (from GDP per capita plus 1 percent
in the Affordable Care Act). Consistent with the Affordable Care
Act, when spending growth exceeds this, IPAB must recommend to
Congress policies to reduce the rate of growth to meet that target
which would go into effect unless Congress enacted policies that
achieve equivalent savings. The proposal would also allow IPAB to
promote "value-based benefit designs" and grant it additional
enforcement mechanisms such as automatic sequester.
- Partnership for Patients: The president counts among his
reforms that will reduce spending the "Partnership for Patients"
initiative announced yesterday. Through the public-private
partnership that aims to reduce readmissions and occurrences of
adverse events, Obama expects to save $50 billion in Medicare and
billions of more in Medicaid over the next 10 years.
- Medicare and Medicaid fraud and abuse: The proposal would
limit states' use of provider taxes to receive federal matching
Medicaid funds and is billed in the proposal as a way to prevent
states from being able to lower their own spending while not
providing additional health services to Medicaid beneficiaries.
Other program integrity provisions proposed include recovering
"erroneous" payments from Medicare Advantage and establishing upper
limits on Medicaid payments for durable medical equipment.
- Prescription drug spending: The president proposes
enacting recommendations from the bipartisan Fiscal Commission that
would reduce prescription drug spending and also speed availability
of generic biologics, prohibit brand-name companies from entering
into "pay for delay" agreements with generic companies and implement
Medicaid management of high-prescribers users of prescription drugs.
The president also proposes instituting across-the-board spending
reductions if, by 2014, the projected ratio of debt-to-GDP is declining
toward the end of the decade, but would exclude Medicare benefits, as
well as Social Security and low-income programs.
Additional spending reductions are included in the president's budget
framework, including those related to taxes and defense spending and can
be found in "The
President's Framework for Shared Prosperity and Shared Fiscal
Responsibility," released by the White House today.
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