Some Say Medicare and Medicaid Cuts Likely To Help Reduce Federal Spending
The Wall Street Journal on Friday examined how Medicare and Medicaid, which together account for nearly one-quarter of federal spending, could be a "juicy targe[t]" for some lawmakers attempting to reduce federal spending, but some have questioned whether cuts could be large enough "to shrink the deficit substantially." Medicare payments to hospitals and Medicaid program spending could become "prime target[s]" of lawmakers' efforts to reduce the estimated $413 billion federal budget deficit, according to the Journal.
Medicare's budget comprises about 13% of total federal spending, and the program's cost is expected to rise in 2006 when the prescription drug benefit takes effect. Under the new Medicare law, hospitals are scheduled to receive a $25 billion payment increase over the next 10 years; however, legislators might continue a "seesaw pattern" that has developed over the last few years and "backtrack" on the approved rate increase as a way to ease budget pressures. Administration officials also might propose ways to "make Medicaid spending more predictable" by placing limits on federal contributions, the Journal reports.
However, implementing such changes has "big obstacles," such as legislators' "preoccup[ation]" with Social Security reform and criticism from many governors who have opposed similar proposals in the past. According to the Journal, health insurers probably will "escape unscathed" by payment reductions because they are "at the heart of Republican efforts to increase private-market forces in Medicare." However, if insurers do not participate in Medicare's new regional plan system, lawmakers could consider reducing $10 billion in funding scheduled to be distributed in 2007. Physicians might also "escape cuts and might even get increases," as legislators might "heed doctors' arguments that the rate formula is flawed and needs to be fixed," the Journal reports (Lueck, Wall Street Journal, 12/3).