Obama’s Multiyear Debt Reduction Plan To Seek Health Program Savings

On Wednesday, President Obama is scheduled to announce plans to develop a multiyear debt-reduction proposal that will search for savings within Medicare and Medicaid but will not seek to restructure the programs, CQ Today reports (Ethridge, CQ Today, 4/11).

Competing With GOP Plans

Obama is expected to urge bipartisan negotiations on the new proposal, which will compete with plans offered last week by House Republicans, according to administration officials.

House Budget Committee Chair Paul Ryan (R-Wis.) last week 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.

The House Republican Study Committee released an alternate FY 2012 budget proposal that would cut $9.1 trillion in federal spending over the next 10 years and would also include substantial Medicare and Medicaid cuts. Democrats criticized the proposals for making cuts to entitlement programs but not reducing defense spending or seeking higher tax revenue.

Senior White House adviser David Plouffe said that Obama will not offer details regarding the new plan during the announcement but that the president will set deficit-cutting goals (California Healthline, 4/11).

Goals of Obama's Plan

Analysts say Obama will begin discussing the plan by emphasizing cuts to the programs included in the federal health reform law (CQ Today, 4/11). Most believe he will design the new plan's goals around recommendations issued in December 2010 by the bipartisan National Commission on Fiscal Responsibility and Reform (Dowd/McCarthy, National Journal, 4/11).

Those recommendations include:

• Instituting a new formula for physician reimbursement that would replace the sustainable growth rate and encourage "care coordination across multiple providers and settings" that also "pays [physicians] based on quality instead on quantity of services";
• Establishing and enforcing a national budget for Medicare, Medicaid and all other federal health programs;
• Stronger authorizations for the Independent Payment Advisory Board, which was created under the health reform law to slow Medicare spending growth, and placing hospitals under its purview in 2015;
• Adopting comprehensive malpractice reform, which would not include a cap for non-economic damages;
• Increasing cost-sharing among Medicare beneficiaries and requiring plans to provide rebates for brand-name drugs (California Healthline, 4/11);
• Tying Medicare costs to individuals' incomes; and
• Moving nearly nine million residents eligible for both Medicaid and Medicare into Medicaid managed care programs (National Journal, 4/11).

Rivlin-Domenici Plan

CQ HealthBeat reports that a "likely guide" for bipartisan budget discussions is a plan developed by former Congressional Budget Office Director Alice Rivlin and former Sen. Pete Domenici (R-N.M.).

Center for Studying Health System Change President Paul Ginsburg said the plan was "designed to be acceptable to both Democrats and Republicans" on a deficit reduction task force convened by the Bipartisan Policy Center. The center released the proposal in November 2010.

The proposal bears some resemblance to Ryan's FY 2012 budget proposal, as Rivlin helped Ryan develop an earlier version of that plan. The Rivlin-Domenici plan also would establish a premium support system for Medicare that would act similar to vouchers.

However, the plan would begin in 2018 rather than 2022, as would Ryan's plan. It also would keep traditional Medicare as an option for all residents. Traditional Medicare would remain the default enrollment program under the Rivlin-Domenici plan, and seniors would be able to choose coverage through private plans if they wished.

In addition, the Rivlin-Domenici plan would increase the government's level of premium assistance according to growth in the gross domestic product plus one percentage point, or about 4.3% annually, while Ryan's plan would increase assistance by the rate of general inflation at about 2.3% annually.

The Rivlin-Domenici plan also would allow for Medicaid's transition to block grants, but it presents the transition as only one potential strategy for the program (Reichard, CQ HealthBeat, 4/11).