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Summary of the President’s Proposal for Economic Growth and Deficit Reduction

President Obama recently proposed $4 trillion in budget reductions over the next 10 years. This includes $1 trillion from the Budget Control Act of 2011, $1 trillion in savings from winding down the wars in Iraq and Afghanistan, $1.5 trillion in federal tax reforms (fewer loopholes, lower rates and alternative minimum tax (the Buffet rule) for persons making over $1 million a year) and $580 billion in cuts to entitlement programs. $320 billion would be cut from Medicare and Medicaid. This summarizes the Medicare and Medicaid cuts.

1. Prohibit pay for delay agreements by pharmaceutical manufacturers in order to increase the availability of generics
2. Reduce the exclusivity period for brand name biologics
3. Streamline FEHB pharmacy contracting
4. Recover overpayments to Medicare Part C. Dedicate penalties for non-adoption of EMRs to deficit reduction. Require prior authorization of advanced imaging. Update (i.e. selectively reduce) Medicare payments for advanced imaging. $5 billion over the next decade
5. $25 increase in Part B deductible in 2017, 2019 and 2021 for new beneficiaries. $1 billion over the next decade.
6. Home health copay of $100 per home health episode for new beneficiaries beginning in 2017. $0.4 billion over the next decade.
7. Part B premium surcharge beginning for new beneficiaries in 2017 for those purchasing comprehensive Medigap policies that negate the cost sharing incentives of the Medicare program. $2.5 billion over the next decade.
8. Reduces the Medicare allowance for bad debts from non-payment of copays and deductibles from 70% to 25% in 2013. $20 billion over the next decade.
9. Reduces Indirect Medical Education add-on payments by 10% beginning in 2013. $9 billion over the next decade.
10. Reduce excessive payments for rural hospitals. $6 billion over the next decade.
11. Encourage more efficient post-acute care. $40 billion over 10 years
a. Adjust payment updates for certain post-acute providers
b. Equalize payments between SNFs and inpatient rehab facilities for the same treatments of specified conditions
c. Set criteria for use of higher cost inpatient rehab facilities
d. Reduce SNF payments by up to 3% beginning in 2015 for excessive, preventable hospital readmissions
12. Align Medicare drug reimbursements to the Medicaid program policies beginning in 2013. $135 billion over 10 years.
13. Increase Part B and D premiums for higher income beneficiaries in 2017. $20 billion over 10 years.
14. Set the growth rate target for the Independent Payment Advisory Board at GDP + 0.5% (currently GDP + 1.0%)
15. Reduce Medicaid fraud and abuse. $1.4 billion over the next decade
a. 3rd party liability
b. Enforce drug rebate agreements
c. Track high prescribers and users of prescription drugs
d. Prohibit states from using federal funds as the state Medicaid match
16. Allow states to use benchmark benefits for optional Medicaid eligibles over 133% of FPL
17. Permit state innovation waivers under ACA to begin in 2014 (rather than 2017)
18. Phase down Medicaid provider taxes beginning in 2015. $26.3 billion over the next decade
19. Blended matching rate for Medicaid, CHIP and Medicaid expansions beginning in 2017. $26 billion over 10 years.
20. Durable medical equipment payments under Medicaid may not exceed Medicare payments. $4.2 billion over 10 years.
21. Reduce federal Medicaid DSH payments. $4.1 billion over 10 years
22. Income for purposes of calculating Exchange and Medicaid financial eligibility includes Social Security payments. $14.6 billion over 10 years
23. Reduce the Prevention and Public Health Fund to $13.8 billion. Savings of $3.5 billion over 10 years.

Source: Office of Management and Budget, Living Within Our Means and Investing in the Future, The President’s Plan for Economic Growth and Deficit Reduction (September, 2011) at www.budget.gov

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