Democratic Debt Panel Members Offer New Deficit-Reduction Plan

On Monday, Democrats on the debt panel offered a new deficit-reduction plan that would reduce the federal deficit by $2.3 trillion over 10 years, in part by cutting about $400 billion from Medicare and Medicaid, Politico reports (Sherman/Raju, Politico, 11/9).

The proposal is smaller than an earlier plan by Democrats, which aimed to reduce the deficit by $3 trillion.

The new plan would cut government spending by $1 trillion and raise $1 trillion in tax revenues (AP/Washington Post, 11/9). The proposal also would:

• Cut $350 billion from Medicare, including $250 billion from providers and $100 billion by requiring beneficiaries to contribute more to the program;
• Eliminate $50 billion from Medicaid and the federal health reform law, $8 billion of which is slated for preventive health efforts;
• Find $5 billion in savings in the durable medical equipment program;
• Reduce federal funds by $4 billion for hospitals that care for more uninsured patients, known as "disproportionate-share hospitals";
• Generate $13 billion in savings through a Medicaid "provider tax"; and
• Create $20 billion in savings by increasing federal rebates from drugmakers.

Plan Calls for Using Defense Funds for 'Doc Fix'

The Democrats' plan also calls for using defense funds made available through a decreased presence of U.S. soldiers in Afghanistan and Iraq to offset a scheduled cut to Medicare physician payments (McCarthy, National Journal, 11/10).

Since 2002, Congress annually has passed a series of short-term bills to block scheduled cuts to Medicare reimbursement rates under the sustainable growth rate formula that determines Medicare reimbursement rates for physicians.

The most recent "doc-fix" bill, enacted in December 2010, is scheduled to expire on Jan. 1, 2012, at which point physicians face a 29.4% payment rate cut. However, CMS recently issued a final rule for hospital and physician payments for 2012 with a proposal to cut physician reimbursements by 27.4% because Medicare cost growth was lower than expected (California Healthline, 10/28).

Physicians believe the defense funds could help offset a permanent fix for the SGR. Certain lawmakers also are considering the idea. Sens. Lamar Alexander (R-Tenn.) and John Barrasso (R-Wyo.) have acknowledged the strategy as a possible solution (McCarthy, National Journal, 11/8).

New Republican Plan

Republicans countered the Democrats' new plan with their own debt proposal on Tuesday.

The plan would reduce the deficit by about $1.5 trillion over 10 years by increasing tax revenue by $300 billion and raising the Medicare eligibility age from 65 to 67. The GOP proposal marks the first time Republicans have considered actual tax increases as part of deficit-reduction strategies (California Healthline, 11/9).

However, the panel remains at an impasse because both parties believe they have made significant concessions with their proposals while the other side believes the plans do not go far enough (Politico, 11/9). Democrats and Republicans continue to haggle over the GOP's reluctance to accept high tax revenue and Democrats' insistence against deep cuts to entitlement programs (California Healthline, 11/9).

Panel Misses First Deadline

The debt panel already has missed a preliminary deadline to deliver their recommendations to the Congressional Budget Office for a cost analysis, National Journal reports.

Over the last few weeks, CBO and debt panel members have said the agency should obtain the committee's debt plan by the end of October or the beginning of November in order to score it before the Nov. 23 deadline.

As of Thursday, the panel has 13 days to develop a plan, draft legislative language and get a CBO score before voting for approval. However, there is "no sign" that the committee is close to a deal, according to National Journal.

Panel member Rep. Chris Van Hollen (D-Md.) said this week is "critical" to the committee's chances of reaching an agreement (O'Donnell, National Journal, 11/10).