Obama proposes new curbs on health-care spending

President Obama proposed Wednesday tighter curbs on Medicare spending and a new way of sharing Medicaid and children’s health-care costs with states as he laid out a path to rein in the entitlement programs that pose the single largest threat to the nation’s fiscal future.

The White House said that over the next decade, these recommendations, plus more modest measures to slow the nation’s rampant medical spending, would save $290 billion beyond the steps already envisioned in the president’s budget and the year-old law to overhaul the health-care system.

But Obama’s framework largely preserved the entitlement programs — a central part of the nation’s social safety net — in their existing form. This was an explicit rejection of House Republicans, who favor converting Medicare into a voucher program and Medicaid into block grants that would give states more latitude to cut benefits and people from the program.
“[L]et me be absolutely clear,” the president said in an afternoon speech at George Washington University. “I will preserve these health-care programs as a promise we make to each other in this society.”

A central aspect of the president’s Medicare proposal relies on a controversial board, to be created by 2013 under the 2010 Affordable Care Act, that will be empowered to devise ways to slow spending in the program if costs rise faster than specific limits. Under the year-old law, the board would undertake such work if Medicare spending grew by 1 percent faster than the gross domestic product. Obama would lower that ceiling to 0.5 percent faster than the GDP.

The law calls for the panel, to be known as the Independent Payment Advisory Board, to make recommendations to cut Medicare to Congress. But if Congress fails to act, the Department of Health and Human Services secretary could make the cuts — an arrangement that many Republicans argue would preempt Congress’s authority.

Liberal and conservative health-policy specialists alike questioned whether it is possible to clamp down significantly on the program’s spending without broader changes in the way health care is paid for and delivered.

“Really tight controls mean lots of changes one way or another,” said Marilyn Moon, who directs health programs at the American Institutes of Research and is a former public trustee of the Medicare and Social Security programs. Gail Wilensky, a senior fellow at Project Hope who ran Medicare and Medicaid under President George H.W. Bush, said, “If we don’t redesign what we are doing, we can’t just cut unit reimbursement and think we are somehow going to get a better system.”
In his roster of health-care proposals, Obama has embraced a few ideas from the recommendations in December of a national commission that he had assigned to produce strategies to curb federal deficits. Among them is a recommendation that would require pharmaceutical companies to give rebates for medicine to about 9 million Americans with government drug coverage who qualify for both Medicare and Medicaid. This idea had been part of the House’s version of health-overhaul legislation last year but is not in the final law.

But the president has omitted significant elements of the fiscal commission’s thinking — such as changes to payments for doctors who treat Medicare patients, a possible repeal of a new government program to insure long-term care, reductions in subsidies for medical education and new restrictions on private coverage to supplement Medicare.

Obama’s proposal would not go as far as the Medicare limits envisioned by House Budget Committee Chairman Paul Ryan (R-Wis.), the chief author of a deficit-reduction plan the GOP-led House is considering. Ryan’s plan would place a firm limit on Medicare spending. The health-overhaul law and the president’s proposal would set a growth rate beyond which the Independent Payment Advisory Board would recommend savings.

The other main change Obama proposed would transform the way the government pays its share of the cost of both Medicaid and the Children’s Health Insurance Program — both programs that are a joint responsibility of the federal government and states.

Like now, the federal share would depend on a state’s wealth, with the federal government chipping in more in states that are comparatively poor. But until now, the programs have had separate formulas for Medicaid and CHIP, and the health-overhaul law is scheduled to complicate the picture further starting in 2014, when Medicaid will expand to cover more people, with the federal government covering the entire cost for the first several years.

Under the president’s proposal, each state would be paid a single “blended” rate that combines both programs and Medicaid patients old and new to the program. Asked whether such a change would leave states paying more or less, a senior administration official, speaking to reporters on the condition of anonymity, said that “the intent is to simplify the program,” adding that states might save money over the long term but that the details have not been worked out.

Amy Goldstein is a national reporter for The Washington Post, focus on health-care policy.
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