Trims to Medicare, Medicaid Are Proposed to Help Fund Reform

By Lori Montgomery and Scott Wilson
Washington Post Staff Writers
Sunday, June 14, 2009

President Obama yesterday outlined measures to trim spending on federal health programs for the elderly and the poor by an additional $313 billion over the next decade, bringing his total proposed savings close to the amount necessary to cover the cost of his signature health-care plan, a top adviser said.

In his weekly radio address, Obama proposed limiting the growth of Medicare fee-for-service payments, taking hospitals and other health-care providers at their word that they will reduce costs. He also proposed cutting subsidies to hospitals that treat uninsured patients on the theory that such payments will decline as more people are covered through his plan.

The president also called for reducing payments to drug companies that serve Medicare recipients. Advisers declined to release details, saying the idea is still under discussion.

"These savings underscore the fact that securing quality, affordable health care for the American people is tied directly to insisting upon fiscal responsibility," Obama said. "And these savings are rooted in the same principle that must guide our broader approach to reform: We will fix what's broken, while building upon what works."

Obama and his senior advisers have identified rising health-care costs as the biggest long-term drag on the federal budget, mainly because of the sharply escalating costs of the Medicare and Medicaid programs. He has said that reining in health-care costs is the key to reducing the deficit and has vowed that his plans for reform will require no additional borrowing.

The radio address capped a week during which Obama emphasized in and away from Washington the importance of health-care reform. He held a town hall forum in Green Bay, Wis., on Thursday, and he asked that this fall, congressional leaders send him legislation extending health insurance to the 47 million Americans without it. As he said in his radio message yesterday, "I know some question whether we can afford to act this year. But the unmistakable truth is that it would be irresponsible to not act."

His offer of new spending cuts comes against a backdrop of public concern over the nation's fiscal health and long-term spending plans that even he has acknowledged would lead to "unsustainable" deficits. His 10-year budget would shrink the $1.3 trillion annual deficit left by the Bush administration before allowing it to widen again in its final years.

By requiring cuts in federal payments to health providers, the measures would go a long way toward ensuring that innovations produce savings for the federal government and restrain runaway growth in spending on Medicare and Medicaid.

Congressional budget analysts agree that the approach will save money, and the Senate Finance Committee has included two of Obama's biggest money-saving ideas on a list of financing strategies.

"We are examining a wide range of options as we work with the president to craft bipartisan legislation that can become law this year," Sen. Max Baucus (D-Mont.), the Finance Committee chairman, said yesterday in a statement. He applauded Obama's "commitment to our shared goals of lowering health care costs and ensuring quality, affordable care for all Americans."

But many lawmakers are not enthusiastic about slashing payments to hospitals and other providers without clear evidence that the cuts will not hurt patients back home. Even small cuts on the Senate Finance Committee list have provoked widespread grumbling.

Aides in the Senate Finance and House Ways and Means committees, whose members are working to draft health reform financing plans, said yesterday that Obama's new proposals would "raise some hackles" and spur "some pushback."

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