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Obama Medicare Cuts Target Providers, Then Beneficiaries For Savings

Obama Medicare

First Posted: 09/19/11 02:41 PM ET Updated: 11/19/11 05:12 AM ET

WASHINGTON -- President Obama wants to extract $320 billion in savings from the health care system in his push to trim the deficit, starting with cutting payments to Medicare and Medicaid providers and ending with making beneficiaries pay more.

The biggest savings -- $135 billion over 10 years -- would come from letting Medicare pay for drugs at the same rates as Medicaid, which enjoys much greater rebates on generic and brand-name drugs.

The next largest source of savings -- $42 billion -- would come from nursing homes, rehab centers and long-term care facilities, which the administration thinks can be encouraged to be much more efficient in providing care right after people get out of hospitals.

After that, the plan includes a grab-bag of items, many of which sound familiar from the health care reform debate and target a mix of Medicare and Medicaid programs, with about $248 billion in savings coming from Medicare overall.

Changes in Medicaid payment rates will likely spark protests from large states that have disproportionate levels of people needing assistance getting medical care.

But the cuts that are most likely to spark the loudest cries are those targeting future Medicare beneficiaries.

The White House insists none of the changes will affect people already in the program, and will largely kick in during 2017.

Among the hikes under consideration are:

  • Increasing the deductible for doctors' services (part B of Medicare) by $25 in 2017, 2019 and 2021,
  • Requiring $100 co-payments for home health care visits,
  • Charging an extra 15 percent premium on people who have especially generous Medi-gap plans,
  • Hiking the premiums by 15 percent for Medicare recipients who earn from $85,000 to about $210,000, to raise about $20 billion.

President Obama said in a speech touting his cuts that the pain has to be shared, however, and administration officials insisted he would not pursue such health care cuts unless Congress also requires the wealthy and corporations to pay more.

"The president has also said he will veto any bill that takes one dime from the Medicare benefits seniors rely on without asking the wealthiest Americans and biggest corporations to pay their fair share," an administration official said on a call with reporters.

The plan got a cool reception from AARP, the influential lobby for older Americans, although the group praised the president for not trying to raise the eligibility age for Medicare.

“AARP urges Congress to first cut waste and close tax loopholes instead of taking away the benefits Americans have earned after decades of working hard and paying into the system," AARP Vice President Nancy LeaMond wrote in a statement. "The president and Congress should be thinking of ways to restore middle class prosperity, not weaken it through cuts to benefits. It is neither balanced nor fair to ask seniors, whose incomes average less than $20,000, to contribute even more for their health care."

Read a summary of Obama's health care proposal here.

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