Obama Proposes Plan To Cut Federal Spending by $4T Over Next 12 Years
President Obama on Wednesday announced plans to develop a multiyear debt-reduction proposal that would reduce federal spending by $4 trillion over the next 12 years, the Washington Post reports (Montgomery/Goldfarb, Washington Post, 4/13).
The preliminary plan would cut $480 billion from Medicare and Medicaid, but largely would preserve the programs (Adamy, Wall Street Journal, 4/13). The plan is separate from Obama's FY 2012 budget proposal that he unveiled in February.
Differentiating Plan From GOP Proposal
Last week, House Budget Committee Chair Paul Ryan (R-Wis.) released a FY 2012 proposal that would make $6 trillion in federal spending cuts over the next decade, in part by overhauling Medicare and Medicaid.
It would provide Medicare beneficiaries with lump-sum vouchers to buy private insurance and turn Medicaid into a block-grant system. The Medicaid overhaul would provide states with fixed annual block grants of $11,000 per beneficiary to use as they choose (California Healthline, 4/12).
Speaking of his plans for Medicare and Medicaid in his own proposal, Obama said, "Let me be absolutely clear. I will preserve these health care programs as a promise we make to each other in this society" (Goldstein, Washington Post, 4/13).
He also criticized Republican's budget plan, saying, "Their plan lowers the government's health care bills by asking seniors and poor families to pay them instead," adding, "Our approach lowers the government's health care bills by reducing the cost of care itself" (Norman, CQ HealthBeat, 4/13).
Health Program Changes in Obama's Plan
According to Obama, his plan would reduce Medicare growth per beneficiary to the growth of gross domestic product per capita plus 0.5%. The federal health reform law aims to hold Medicare spending growth to GDP expansion per capita plus 1% (Wall Street Journal, 4/13).
The plan also would strengthen the Independent Payment Advisory Board -- created under the federal health reform law -- and require the board to make recommendations to Congress if spending exceeds the new limit. In addition, the plan would give IPAB more enforcement mechanisms, including an "automatic sequester" to cut spending (Ethridge, CQ Today, 4/13).
In addition, Obama proposed that the federal government pay states a single "blended" rate for Medicaid and CHIP that would apply to current beneficiaries and those who will be enrolled following a program expansion in 2014 (Goldstein, Washington Post, 4/13). The government currently pays up to five different rates for the two programs within any given state. Under the plan, the government still would adjust its pay according to states' wealth.
Obama also suggested stronger efforts to curb abuse and fraud in Medicare and Medicaid filings, as well as stronger incentives for hospitals to reduce medical errors and unnecessary readmissions (Wall Street Journal, 4/13). He also proposed that pharmaceutical companies grant rebates to U.S. residents who qualify for both Medicare and Medicaid, known as "dual eligibles" (Goldstein, Washington Post, 4/13).
The new plan would make significant cuts to military spending and levy higher taxes on high-income U.S. residents to achieve more savings (Montgomery/Goldfarb, Washington Post, 4/13).
Finally, if the federal debt is not stabilized by 2014, the plan includes a "debt failsafe" that would make spending cuts across most programs, with the exception of Medicare, Social Security or low-income programs (Nather, Politico, 4/13).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.