Medicare tapped for savings to cover reform costs, again

Jun 15 2009

In his weekly Internet and radio address Saturday, President Obama announced a plan to cut $313 billion in Medicare and Medicaid spending over the next decade as a way to raise money for overhauling the health care system and covering millions of the uninsured, the Los Angeles Times reports.

The largest savings include "increased efficiencies in the system," cuts to subsidies paid to hospitals for treating the uninsured, cuts to prices the government pays for prescription drugs for seniors. The paper adds: "the proposal -- which includes potential cuts to hospitals, pharmaceutical companies and other providers -- also underscores the political delicacy of the administration's search for money for a massive healthcare overhaul that could cost more than $1.2 trillion over the next decade" (Levey, 6/15).

"The cuts come on top of Medicare and Medicaid revisions Obama requested earlier this year in his fiscal 2010 budget proposal; together with those cuts the White House is now proposing a total of $622 billion in Medicare and Medicaid revisions over 10 years, most of it from Medicare," CQ Politics reports.  "White House Budget Director Peter R. Orszag said the cuts Obama identified are a way of showing how an overhaul could be financed while the Senate Finance and House Ways and Means committees write draft bills. Combined with earlier cuts, Orszag said the administration has now identified nearly $950 billion worth of savings," according to CQ (Bettelheim, 6/14).

The cuts would knock out over $100 billion in direct subsidies to hospitals, the Wall Street Journal reports. "After agreeing in May to contribute to a $2 trillion reduction in health spending over 10 years, the hospital industry is now bristling at the prospect of more givebacks," the Journal reports. The American Hospital Association said its concerned the administration would point to the cuts before Congress mapped out is plan to expand coverage, which would relieve the need for subsidies (Adamy and Rockoff, 6/15).