Obama deficit plan includes strengthened Medicare pay board

Washington -- President Obama on April 13 rebutted a House Republican plan to trim $4 trillion worth of federal deficits over a decade with his own proposal that he said would protect guaranteed benefits in Medicare and Medicaid.

Obama also proposed that the Medicare Independent Payment Advisory Board be directed to enact even deeper reductions than outlined. The 15-member board was created by the health system reform law to improve Medicare quality and cut costs when the program's per capita growth rate exceeds specific targets. The IPAB, which is set to begin its work Jan. 15, 2014, could call for pay cuts to physicians and others that could be overridden only by substantial majorities in both houses.

GOP leaders have vowed to repeal the IPAB and the rest of the health reform law. A bill by Rep. Phil Roe, MD (R, Tenn.), that would accomplish the former had 83 co-sponsors, including four Democrats, at this article's deadline.

The American Medical Association also opposes the IPAB as structured, noting that physicians already are subject to deep pay cuts under Medicare's sustainable growth rate formula that lawmakers have had to override.

"We have strong concerns about the potential for automatic, across-the-board Medicare spending cuts because they are not consistent with meeting the medical needs of patients, which is our primary focus," said Ardis Dee Hoven, MD, chair of the AMA Board of Trustees.

Obama, however, proposed using the strengthened authority for the IPAB and other health care savings in his proposal to pay for a reform of the SGR formula, estimated to cost $300 billion over a decade.

The other health care proposals in the Obama deficit plan include limiting states' ability to draw higher Medicaid payments through funding loopholes and establishing tighter limits on prescription drug spending in Medicare and Medicaid. The president also proposed establishing a single rate for federal Medicaid payments that would increase automatically during recessions.

Obama said he would oppose any reform that fundamentally alters the commitments the nation has made -- in the form of Medicare and Medicaid -- to health care for seniors, the poor and the disabled. The GOP's budget plan would limit federal health spending by changing Medicare into a voucher program that would help seniors buy private coverage. It also would reduce federal Medicaid payments to states and allow states more flexibility on how they run their Medicaid programs.

Obama criticized the House Republican plan -- known as the Path to Prosperity -- for including $1 trillion in tax cuts to wealthier Americans while asking middle- and lower-income people to pay more for health care and college.

"In the last decade, the average income of the bottom 90% of all working Americans actually declined," Obama said. "Meanwhile, the top 1% saw their income rise by an average of more than a quarter of a million dollars each. That's who needs to pay less taxes?" Obama also said he would not approve further extension of the Bush tax cuts to wealthier people.

The House adopted the GOP's fiscal 2012 budget plan by a vote of 235-193 on April 15, with no Democratic support and only four Republicans voting against it. The budget resolution would set fiscal 2012 spending limits for Congress, but it faces strong opposition from Democratic leaders in the Senate.

2011 cuts affect reform

Congress and Obama avoided a partial government shutdown on April 8 by agreeing to about $38 billion in reductions over the previous year in a fiscal year 2011 spending measure that will fund the federal government until Oct. 1. In doing so, Obama and congressional Democrats agreed to cut or repeal three programs in the health reform law, including:

• Ending the Consumer Operated and Oriented Plan, created to foster the development of nonprofit health plans in individual and small group markets.
• Ending the Free Choice Voucher program to allow certain workers in 2014 to use their employers' contribution on health coverage to pay premiums for a health insurance exchange plan or a private health plan.
• Reducing the State Health Access Grants program, which awards money to states to help them expand affordable health care coverage to the uninsured.

In addition, the deal repeals $3.5 billion in performance bonus payments to states that meet certain enrollment goals in Medicaid and the Children's Health Insurance Program. The 2009 CHIP reauthorization created the program.

House Republican support for the 2011 spending bill wavered before the House adopted the package on April 14 on a 260-167 vote. In part, GOP reluctance came from the fact that the Congressional Budget Office concluded that only $352 million of the cuts actually would affect spending in fiscal 2011, which ends on Oct. 1. The CBO also said the measure would cut spending by up to only $25 billion between 2012 and 2016, with the rest of the cuts only reducing dollars Congress is authorized to spend, not dollars Congress is likely to spend.

Fifty-nine House Republicans joined the majority of Democrats to vote against the 2011 spending package on April 14, but 81 Democrats crossed the aisle to help adopt it. The Senate approved the measure 81-19, and Obama signed it into law on April 15.

The CBO did not detail which cuts it deemed part of the $25 billion of real cuts. However, a House Appropriations Committee summary of the $38 billion package outlined about $1.5 billion in cuts to health programs, including $600 million in reduced funding to community health centers.

"This cut is especially perplexing at a time when our nation and the Congress are focused on reducing health care costs," said Tom Van Coverden, president and CEO of the National Assn. of Community Health Centers.