President Obama's Debt Reduction Proposal Includes $320B in Healthcare Savings

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President Obama has revealed his proposed debt reduction plan, which includes $320 billion in savings across both Medicare and Medicaid programs.

President Obama's proposal would reduce the nation's debt by approximately $3 trillion over the next 10 years. His plan features savings of $248 billion through Medicare and $72 billion through Medicaid via the following provisions:

Medicare:
  • Reduce bad debt payments to 25 percent for all eligible providers over three years starting in 2013. This proposal will save approximately $20 billion over 10 years.
  • Reduce the Indirect Medical Education adjustment by 10 percent beginning in 2013, and save approximately $9 billion over 10 years.
  • End an add-on payment for hospitals and physicians in low-population states beginning in fiscal year 2013 in order to save approximately $2 billion over 10 years.
  • Reduce payments from 101 percent to 100 percent of reasonable costs to critical access hospitals and eliminate the CAH designation for those that are fewer than 10 miles from the nearest hospital for a combined savings of $4 billion over the next 10 years.
  • Cut waste, fraud and abuse in Medicare through a variety of measures for savings of $5 billion over the next 10 years.
  • Lower Medicare's Independent Payment Advisory Board's target growth rate from the GDP per capita growth rate plus 1 percent to plus 0.5 percent.

Medicaid:
  • Reduce the Medicaid provider tax threshold from the current law level of 6 percent in 2014 to 4.5 percent in 2015; 4 percent in 2016; and 3.5 percent in 2017 and beyond. This would yield combined savings of $26.3 billion over 10 years.
  • Limit Medicaid reimbursement of durable medical equipment based on Medicare rates for savings of $4.2 billion over 10 years.
  • Reduce Medicaid disproportionate share allotments for hospitals in 2021 for savings of $4.1 billion over 10 years.

President Obama, who has also promised to veto any proposed legislation that would seek only spending cuts without increasing taxes, has already drawn fire from Conservatives who have long opposed tax increases and demand deep spending cuts in entitlement programs, such as Medicare and Medicaid.

President Obama will submit his proposal to a bipartisan Congressional committee charged with finding $1.2-1.5 trillion in savings by Thanksgiving. Failure to submit the recommended savings or failure by Congress to enact the recommendations by that time will result in automatic cuts including a 2 percent cut in Medicare payments.

Related Articles on Debt Reduction:

AMA: Deficit Reduction Must Include Repeal of Sustainable Growth Rate
Obama's Plan to Cut Medicare, Medicaid to Close Deficit Draws Criticism From Democrats, Reform Supporters
Analyst: Healthcare Better Off Under Automatic Cuts Than Super Committee

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