This was announced yesterday afternoon. It's pretty interesting that Obama is taking the insurance companies at their word and calculating in the sa
June 14, 2009

This was announced yesterday afternoon. It's pretty interesting that Obama is taking the insurance companies at their word and calculating in the savings they claim they can find, using that as a go-ahead to cut Medicare reimbursement. It's a bold move and I don't see any downside, although of course the industry will be screaming:

President Obama [...] proposed to rein in 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 to nearly $950 billion -- enough to cover most of the cost of sweeping health reform, 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 providers at their word that they will reduce costs. Obama also proposed slashing subsidies to hospitals that treat uninsured patients, on the theory that very few uninsured patients will remain in the wake of reform.

Obama also suggested reducing payments to drug companies that serve Medicare recipients. Advisers declined to release details, saying the idea was still under discussion.

"These savings will come from commonsense changes," Obama said. "For example -- if more Americans are insured, we can cut payments that help hospitals treat patients without health insurance. If the drug makers pay their fair share, we can cut government spending on prescription drugs. And if doctors have incentives to provide the best care instead of more care, we can help Americans avoid the unnecessary hospital stays, treatments, and tests that drive up costs."

By requiring cuts in federal payments to health providers, the measures would go a long way toward ensuring that untested innovations in health delivery actually 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 included two of Obama's biggest money-saving ideas on a list of financing options released last month.

"There is no doubt that Medicare and Medicaid need reform, but serious changes should not be rushed through Congress as part of a new government-run program that will raise taxes and make health care more expensive, costing middle-class families even more," said House Minority Leader John A. Boehner (R-Ohio).

But like other parts of Obama's plan to pay for health reform, the measures announced today are likely to be met with skepticism on Capitol Hill. Many lawmakers are not enthusiastic about slashing payments to hospitals and other providers back home without clear evidence that the cuts will not hurt patients. Even small cuts on the Senate Finance Committee list have provoked widespread grumbling.

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

It was also unclear whether $950 billion would indeed be enough to cover the full cost of reform. Some outside analysts have said that Congress may have to spend $1.5 trillion or more over the next decade to expand coverage to the nearly 47 million Americans who currently lack insurance.

[...] In February, Obama's budget request set aside $635 billion for health care reform, about half in cuts to Medicare and Medicaid and half in new taxes. With today's address, Obama added $313 billion more to the pot, offering what Orszag called an "unprecedented" effort to "put down in such clarity how reform will be financed."

In addition to saving money in the short term, the newly proposed cuts would "spur productivity in a way that does not exist under current law," Orszag said, helping to prevent an increase in health costs that threatens to bankrupt the federal government. They would also save Medicare patients money -- as much as $43 billion in reduced premiums for prescription drug coverage over the next 10 years.

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