HealthLawProf Blog

Editor: Katharine Van Tassel
Akron Univ. School of Law

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Thursday, January 31, 2008

Balancing the Budget through Medicare and Medicaid Cuts

The New York Times reports today on President Bush's announcement that he will "call for large cuts in the growth of Medicare, far exceeding what he proposed last year, and he will again seek major savings in Medicaid."

Health care savings are a crucial part of Mr. Bush’s plan to put the nation on track to achieve a budget surplus by 2012. But before then, the officials said Wednesday, the White House anticipates higher deficits in 2008 and 2009, reflecting the current weakness of the economy and the cost of a stimulus package. . . .

Mr. Bush has repeatedly said that the costs of Medicare and Medicaid, which dwarf spending for lawmakers’ pet projects, are unsustainable. The two health programs account for nearly one-fourth of all federal spending, and their combined cost — $627 billion last year — is expected to double in a decade.

Budget documents show that Mr. Bush will propose legislative changes in Medicare to save $6 billion in the next year and $91 billion from 2009 to 2013. In his last budget, by contrast, his legislative proposals would have saved $4 billion in the first year and $65.6 billion over five years.

The president’s budget also takes aim at Medicaid, the insurance program for low-income people. He would pare $1.2 billion from it next year and nearly $14 billion over five years.  Those figures do not include tens of billions of dollars that Mr. Bush wants to save through new regulations. Such rules are not subject to approval by Congress, but could be revised by a future administration.

Congressional Democrats often pronounce Mr. Bush’s budget dead on arrival, and they have no reason to make unpopular cuts in this election year.  But lawmakers say they feel obliged to pass a Medicare bill in the first half of this year, to spare doctors from a 10 percent cut in Medicare fees that would otherwise take effect on July 1. . . .

Most of the Medicare savings in the budget would be achieved by reducing the annual update in federal payments to hospitals, nursing homes, hospices, ambulances and home care agencies.  The budget would not touch payments to insurance companies for private Medicare Advantage plans, even though many Democrats and independent experts say those plans are overpaid.

In the next five years, the largest amount of Medicare savings, by far, would come from hospitals: $15 billion from an across-the-board reduction in the annual updates for inpatient care; $25 billion from special payments to hospitals serving large numbers of poor people; and $20 billion from capital payments for the construction of hospital buildings and the purchase of equipment.  In addition, the president’s budget would reduce special Medicare payments to teaching hospitals, including many in the New York area, by $23 billion over the next five years.

This sounds like a terrific way to save money . . . .

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