President’s Budget Seeks Major Cuts in Health Care Savings

President Obama’s fiscal 2014 budget request to Congress, released April 10, calls for $400 billion in health care savings and cancels the automatic sequestration cuts, including the 2 percent reduction annually in Medicare payments to providers. While the budget makes no structural changes to Medicare, it does make payment reductions to certain health care providers and increases the income-related premiums that beneficiaries pay under Part B fee-for-service and the Part D prescription drug program, beginning in 2017, saving an estimated $50 billion over 10 years. The biggest Medicare savings in the budget package, $123 billion over 10 years, would come by allowing the program to get the same rebates that Medicaid gets for brand-name and generic drugs. In other major Medicare proposals, the budget would:

• Reduce payments to hospitals and skilled nursing facilities (SNFs) for bad debt from 75 percent to 25 percent over three years, saving $35.9 billion over 10 years.

• Reduce payments by up to 3 percent to SNFs with high rates of care-intensive, preventable hospital readmissions, beginning in 2016, for a savings of $2 billion over 10 years.

• Introduce a $100 copay per home health episode, beginning in 2017, saving $350 million over 10 years.

On the issue of Medicare physician payment reform, the administration says it is committed to working with Congress “to provide predictable payments that incentivize quality and efficiency in a fiscally responsible way. Failing to address this issue creates uncertainty about beneficiaries’ access to care.” The budget request supports “a period of payment stability lasting several years to allow time for the continued development of scalable accountable payment models. Such models can take different forms, but all will have several common attributes such as encouraging care coordination, rewarding practitioners who provide high-quality, efficient care, and holding practitioners at financial risk for consistently providing low quality care at excessive costs.”